QUALIFIED SUBCHAPTER S-CORP TRUST
Back to GlossaryDefinition
A trust that is allowed to own stock in S-Corporations.
Summary
A Qualified Subchapter S-Corp Trust (QSST) is a special type of trust that allows S-Corporation stock to be held in trust while maintaining the company's S-Corp tax election. Since S-Corps can only have specific types of shareholders, this trust structure enables wealthy individuals to transfer S-Corp ownership to beneficiaries through a trust arrangement without losing favorable S-Corp tax treatment. The trust must meet strict IRS requirements and can only have one income beneficiary at a time.
Usage Context
This term is crucial when studying advanced estate planning, business succession planning, and tax-advantaged business structures. Understanding QSSTs is essential for comprehending how wealthy families maintain control and tax benefits when transferring business ownership across generations.
Common Confusions
- Thinking any trust can hold S-Corp stock without consequences
- Confusing QSST with ESBT (Electing Small Business Trust)
- Misunderstanding that only the income beneficiary is taxed, not the trust
- Believing multiple income beneficiaries are allowed simultaneously
- Not realizing the strict IRS qualification requirements
