The term qualified subchapter S trust refers to one of the two trusts that can hold subchapter S corporation stock. Qualified subchapter S trusts are oftentimes used by donors to plan for the eventual transfer of subchapter S stock to a single heir after their death.
Qualified subchapter S trusts (QSST) are frequently used as an estate planning tool. These trusts allow holders of subchapter S stock to transfer ownership to a single beneficiary. This is in contrast with an electing small business trust (ESBT), which allows for multiple beneficiaries. Both QSST and ESBT can help maintain the integrity of a subchapter S corporation when a shareholder passes away and the shares are transferred to an ineligible trust.
In order for a trust to be a QSST, it must meet the following conditions: