The clients are co-founders of a venture-backed technology company that was acquired for approximately $300 million. At the time they engaged Promissory, the company was QSBS-eligible and acquisition conversations were expected to begin within the next 12 months.

Neither founder had taken prior QSBS planning steps, other than confirming the QSBS eligibility of their stock. Their engagement raised several standard and non-standard questions: HEMS distribution options, visa status constraints, and adverse beneficiary conditions. Promissory completed the full setup — valuations, trust drafting, and funding — in weeks.

The Challenge

• Compressed timeline: The expectation of an acquisition within 12 months meant swift decisions were needed to to avoid forfeiting the multiplied exclusions
• No pre-existing wealth management relationship: Neither founder had an RIA or wirehouse advisor in place pre-liquidity. Promissory coordinated an interim investment advisor so the trusts were properly constituted from day one — no relationship required to get started.
• Post-liquidity advisor transition: After the acquisition Promissory helped facilitate introductions and both founders engaged their respective advisors, both a wirehouse advisor and a boutique RIA: MorganStanley and Twin Focus Advisors, respectively. For MorganStanley, we transitioned from a directed trust to a delegated model requiring legal amendments, which Promissory managed end-to-end.
• Promissory also facilitated swapping the interim investment advisor for a boutique advisory firm who was comfortable with assuming the role of investment advisor in a directed trust.

Trust Structures & Strategic Foundation

Each co-founder created two irrevocable trusts, designed to stack QSBS exemptions beyond each founder's individual $10M federal limit.

• Spousal Lifetime Access Non-Grantor Trust (SLANT): A non-grantor trust that removes shares from the founder's estate while allowing indirect access via a spouse beneficiary. The non-grantor classification is what enables a separate QSBS exclusion.
• Non-Grantor Children's Trust: An irrevocable trust benefiting children (or future children), with a second, independent $10M QSBS exclusion.
• A Future Children’s Non-Grantor Trust: one of the founders did not yet have children and is planning to in the near future. We were able to create a future children’s trust that names a current beneficiary with a limited interest in the trust. Once their first child is born, they will replace the current beneficiary as primary.

Trusts were custodied in Nevada, which offers superior asset protection, friendly decanting rules, and no state income tax.

Total Savings

By stacking QSBS exemptions across two trusts, one founder reduced a projected ~$7.5M tax liability to under $250K — saving over $7M in a single engagement. Across both founders and four trusts, there was a combined savings that neared $14M.

* California does not recognize the federal QSBS exclusion at the state level. Entire gain is subject to 13.3% tax rate since both founder and beneficiaries reside in CA. Founder B's total savings reflect federal exclusions only. Additional state-level planning strategies may be available to further reduce CA tax exposure.

Key Takeaways

QSBS trust planning is one of the best things founders and early shareholders can do to  reduce tax at exit.

• Timing is everything. Trusts must be funded before a liquidity event is substantially certain. Waiting for a signed LOI is too late. In this case, a 3-week turnaround protected millions that would have otherwise been taxable.
• Trust stacking multiplies the exclusion. Each trust is a separate taxpayer with its own $10M QSBS exclusion. Two founders with two trusts each = four exclusions = up to $40M in federally tax-free gains.
• Co-founders can plan in parallel. Each founder's trust structure is independent. Promissory can run both engagements simultaneously — same timeline, separate valuations, and separate trusts.