Estate planning with electing small business trusts

Article Abstract:

Several provisions of the Small Business Job Protection Act of 1996 offer flexibility in tax planning for S corporation stock in estates and trusts. One important legislative change is the addition of Sec. 1361(c)(2)(A)(v), which introduces a new type of trust called an 'electing small business trust' (ESBT). While an EBST may not be the best estate planning tool for S corporations, it offers opportunities not provided by a qualified Subchapter S trusts. These include the qualification of a spray trust with multiple income beneficiaries as an ESBT, and accumulation and addition of income to principal under ESBT. However, ESBT may not appeal to S shareholders when the tax and administration burdens are greater than the nontax benefits.

Personal Tax Planning, Estate Planning, Trusts, Funds, Trusts, and Other Financial Vehicles, Planning, Evaluation, Personal finance, Small business, S corporations, Trusts and trustees, Trustees, Trusts (Law)

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Grantor trusts are now useful planning tools

Article Abstract:

Grantor trust treatment has long been seen as being disadvantageous for most irrevocable trusts. Tax developments in recent years have changed this view. The 1986 Tax Reform Act minimized the benefits of shifting income to irrevocable trusts, thus eliminating most of the advantages associated with treating trusts as a separate taxpayer. Changes in tax law and the development of new estate planning techniques have prompted a review of the possible uses of creating grantor trusts. Tax benefits now offered by such trusts to the grantor and the grantor's family are analyzed in this context.

Finance, taxation, & monetary policy, Grantor trusts

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