Legal Question in Wills and Trusts in New Jersey

Re: Aspects of a Testamentary Trust

It appears that the entity is the C Corp, which owns the assets. The shares of the Corp must be the trust assets. The type of entity owning the real estate can be changed from a C Corp to another entity, such as a LLC, which passes its income/losses through to the owner who then reports its share of the income/loss on its tax return. If profitable, the net income is also distributable to the members (trust beneficiaries), pre-tax, not post-tax, and are reported as dividends. A LLC, if used, possibly by creating a new LLC and then merging the entities (C Corp is merged into LLC). There may be some tax ramifications on the merger and this should be discussed with your CPA. Any change should be effective January 1, but implemented by December 31. The Corp could elect to become a "S" Corp., but with the trust as owner of the shares, the trust would have to be modified to become a qualified "S" trust, which will allow the annual income/loss only to be used by one beneficiary. The designated beneficiary cannot be changed and would get the benefits for his/her lifetime or until the Corp was liquidated. There are many questions that are involved, including the purpose of the trust, which cannot be answered without reviewing the trust document and ascertaining its purpose. More information would be required. If you'd like to talk about this, call me at 973-377-3313.