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Question:

Enjoying your book (Get Your Ducks in a Row: A Baby Boomer’s Guide to Estate Planning). At page 105. I already have my estate documents including a pour over will, revocable living trust, durable power of attorney, and health care advanced directive. After finishing your book, I may amend it based on advice you make in your book.

Question – I am helping my son before he contacts a lawyer for a revocable trust. He is single, has two minor children (ex-wife has custody) and is a homeowner. He has a single-owner small business Sub-S Corporation so there is no other officer or individual on his business checking and savings accounts. If he passes, the trust will create two sub-trusts for the minor children. Can a trustee be given rights in the trust (and similar clauses in the pour over will, as well) to manage his business and take over all rights to Sub-S bank accounts so we can move any cash except a small amount to his personal checking without any need for probate? The trustee will close his business after preparing a final income tax return with his accountant, all within one year. I want to prevent having to probate the pour over will to get the bank to give the trustee the right to take over the accounts. I have read if a trust takes over a Sub-S, it reverts to a C Corporation unless you elect for a Qualified QSST or ESBT within two years.

Response:

I’m glad you’re enjoying the book. Your son can definitely transfer the ownership of his business into his revocable trust. You are correct that if the trust were to continue to hold own the business after your son’s death it would have to qualify as a Qualified Subchapter S Trust (QSST) or Electing Small Business Trust (ESBT) within two years. But since the plan is to sell the business as soon as possible after your son’s death, I don’t see this necessity.

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