Article on ESBTs After the Sale of S Corporation Shares

Chris D. Saddock (Saddock Co., Dallas) recently published an article entitled, Qualifying a Grantor Trust as an ESBT After the Sale of S Corporation Shares, Probate & Property Vol. 28 No. 4, 58-60 (July/August 2014).  Provided below is a portion of the article’s introduction:

Often successful small businesses look to the S corporation as a mechanism for avoiding the corporate tax while taking advantage of a corporate entity structure.  Statutory restrictions on S corporation ownership, however, may significantly limit the shareholder’s asset protection and estate planning opportunities.  Specifically, to maintain an S election, stock must be held by a U.S. citizen or a qualified entity.  Only three types of trusts are qualified to hold S corporation shares: grantor trusts, qualified Subchapter S trusts (QSSTs), and electing small business trusts (ESBTs.)