Estate Planning With S Corp Trusts After Tax Reform: QSSTs, ESBTs, and the 20% QBI Deduction

Navigating Tax Reform Changes and Pass-Through Income Deductions

Recording of a 90-minute CLE/CPE webinar with Q&A


Conducted on Wednesday, April 18, 2018

Recorded event now available

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Program Materials

This CLE/CPE webinar will provide estate planning counsel and advisers with a practical guide to the estate planning opportunities in using S Corporation Trusts in light of the 20% pass-through deduction for pass-through entities passed in the recent tax reform law. The panel will detail those activities eligible for the deduction, detail the changes in ESBT and QSST treatment contained in the new law, and offer useful guidance on planning tools for pass-through entities to restructure business activities to qualify for tax savings.

Description

The 20% deduction for pass-through entities contained in the tax reform law passed in December, 2017 will create significant opportunities, and no small amount of additional complexity, for estate planners and advisers to clients whose estate plans contain trusts to hold and transfer S Corporation ownership interests. Estate planning counsel should be looking now at potential changes to existing trusts to take advantage of new tax saving opportunities for S Corp trusts.

The law makes several notable changes to the rules governing trust ownership of S Corporation stock. Under the new rules, Qualified Sub-S Trusts (QSSTs) are entitled to the 20% deduction for qualified pass-through income; however, the statute as written does not appear to extend that treatment to ESBTs holding S Corp stock. This would make the gap between tax treatment of QSSTs and ESBTs, absent guidance or a technical correction from Treasury.

The law also permits ESBTs to have nonresident beneficiaries, even if the ESBT holds S Corp stock, and clarifies that ESBTs making charitable contributions apply individual charitable deduction limits, rather than those of Section 642(c). Both of these provisions may create planning opportunities for estate plans in which an S Corp ownership interest is a significant component.

Estate planning counsel must be adept at applying the new provisions to current and future estate plans involving S Corporations. For existing ESBTs, trustees and their advisers should determine whether the trust document allows for realignment of beneficiaries to allow use of a QSST or, in the absence of this power, whether a modification of the original trust is appropriate.

Listen as our experience panel provides a practical guide to the challenges and opportunities in using trusts to hold S Corporation stock arising from the new tax overhaul bill.

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Outline

  1. Prior rules for ESBTs holding S Corporation stock
  2. Application of the new 20% deduction on qualified pass-through business income
  3. Current areas of uncertainty and discrepancy between ESBT and QSST tax treatment
  4. Evaluating current S Corporation trust structures to see if they still achieve optimal tax benefits

Benefits

The panel will review these and other crucial issues:

  • How does the 20% pass-through income deduction work in the context of Qualified Subchapter S Trusts (QSSTs)?
  • Current differences in tax treatment between an ESBT and a QSST holding S Corporation stock
  • When would it make sense to have an ESBT to hold S Corporation stock?
  • Fixing ESBT trust documents to maximize tax benefits
  • Charitable deduction opportunities under the new law

Faculty

Owen, Langdon
Langdon T. Owen, Jr.

Shareholder
Cohne Kinghorn

Mr. Owen provides tax, business, and estate planning advice, structures various forms of business organizations, and...  |  Read More

Other Formats
— Anytime, Anywhere

Strafford will process CLE credit for one person on each recording. All formats include program handouts. To find out which recorded format will provide the best CLE option, select your state:

CLE On-Demand Video

$297

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CPE Not Available

$297