Own Shares of S-Corp Stock? Consider Adding a Trust to Your Estate Plan

When you first created your estate plan, you may have opted for a relatively simple plan, appointing a personal representative to handle your estate, distribute your assets, and make medical decisions on your behalf. As the years go by, your estate planning needs may change. For example, if you acquire stock in an S-Corporation, you may want to consider creating a special trust to hold title to these assets in order to avoid the need for probate administration and allow for a smooth transfer of the assets after you die.

5 Tips for Transferring S-Corp Shares to a Trust

How can you transfer shares of an S-Corporation into a trust as part of an estate plan update? The following is an overview:

  1. Transfer your ownership of the shares to yourself as Trustee of your trust.
  2. Carefully review the corporate documents to determine how shares of stock in the company are transferred to another person or entity.
  3. Ensure that you follow the corporate procedures carefully when transferring ownership over the stock to your trust.
  4. During your life, the trust can hold the shares of stock for an indefinite period and still qualify as an eligible S-Corporation shareholder.
  5. After you die, the trust must distribute the shares to a qualified shareholder within two years, unless the trust contains special S-Corporation provisions that make it a permitted shareholder under the IRS regulations.

S-Corporations are subject to many specialized rules and regulations. So it’s important to seek guidance from an experienced professional before updating your estate plan to address your interest in this type of stock. We strongly encourage you to contact us today at (714) 459-5481 for more information.

 

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