S Corp & Testamentary Trust


C

CGS

Minority Shareholder died (coming up on 2 years) and the S Corp stock
was put into a Testamentary Trust. The Trustee (daughter) will not act
to avoid losing the S Election. The assets of the Trust are held for
the benefit of the granddaugther at a future date. The Trustee will
not agree to a buy-out. She thinks we are trying to pull one over on
her. We stated that if the price of the buy out is too low, get an
apprasial or she can buy the stock for herself at that price (she has
the money). Basically, she will not act. Do you all know of other
options so as to not blow the S Election?
 
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W

Wallace

CGS said:
Minority Shareholder died (coming up on 2 years) and the S Corp stock
was put into a Testamentary Trust. The Trustee (daughter) will not act
to avoid losing the S Election. The assets of the Trust are held for
the benefit of the granddaugther at a future date. The Trustee will
not agree to a buy-out. She thinks we are trying to pull one over on
her. We stated that if the price of the buy out is too low, get an
apprasial or she can buy the stock for herself at that price (she has
the money). Basically, she will not act. Do you all know of other
options so as to not blow the S Election?

Do your corporation laws allow a buy out or a minority interest against her
wishes? Can another corporation be formed and assets sold to it? This may
raise other issues, of course.
 
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S

Stuart A. Bronstein

CGS said:
Minority Shareholder died (coming up on 2 years) and the S Corp
stock was put into a Testamentary Trust. The Trustee (daughter)
will not act to avoid losing the S Election. The assets of the
Trust are held for the benefit of the granddaugther at a future
date. The Trustee will not agree to a buy-out. She thinks we
are trying to pull one over on her. We stated that if the price
of the buy out is too low, get an apprasial or she can buy the
stock for herself at that price (she has the money). Basically,
she will not act. Do you all know of other options so as to not
blow the S Election?
The daughter could put the stock into a Uniform Gifts to Minors Act
trust. Or if the trust requires or even permits distribution to the
granddaughter, it might be considered a grantor trust with respect to
her.

The only other thing I can think of is a partition - force the whole
company to be sold (the remaining shareholders could buy it if they
are the highest bidder).
 

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