Everything you wanted to know about QSBS trusts

A QSBS trust holds Qualified Small Business Stock in an irrevocable trust structure to help founders and early shareholders preserve and multiply capital gains exclusions under IRS Section 1202.

QSBS eligible trusts can allow you to capture an additional $10 million to $15 million in exclusions per beneficiary at exit, depending on your situation and applicable rules.

By placing shares into properly structured trusts for different beneficiaries, you can create multiple capital gains exclusion buckets under Section 1202, potentially excluding tens of millions in gains at exit.

With Promissory, you answer a short guided questionnaire to create an irrevocable trust, have the document reviewed by an independent estate attorney, and establish custody with a Nevada fiduciary.

We manage trust formation through ongoing administration, obtain your trust EIN, provide custody with a Nevada trustee, perform audit defensible valuations, and handle required IRS reporting and fiduciary documentation.

Trusts are established with a Nevada-based professional trustee to provide asset protection and access to Nevada trust law, while state tax treatment depends on the residency of the beneficiaries.

Yes. Promissory includes an audit defensible gift and estate valuation and handles required IRS reporting, including Form 709 where applicable.

Founders and early shareholders seeking to maximize QSBS exclusions, support estate and wealth transfer goals, and reduce tax at exit should consider QSBS trusts.

QSBS planning works best when trusts are established while share prices and valuations are still low. Waiting typically means higher valuations and reduced planning flexibility.

Our platform is designed so you can create, sign, and place the trust into custody in weeks rather than months.

It depends on your timeline, family situation, and planning goals, which is exactly what your initial consultation is for. Most founders end up with a combination: an IDGT or non-grantor trust for early flexibility, a SLANT for spousal access, and one or two trusts for children or future children. We map it out together before anything is drafted.

Absolutely. Trusts for future children are a common strategy for founders who are earlier in life. The trust is established now, and children become beneficiaries when they're born. The exclusion is preserved regardless of when they arrive.

Conversion to non-grantor status is required before exit to qualify for QSBS treatment. We handle this process, typically 12 to 24 months before your anticipated exit. It’s a planned step, not an emergency, and it’s included in your ongoing support.

A SLAT (Spousal Lifetime Access Trust) is a grantor trust, useful for flexibility while you’re building your company. A SLANT (Spousal Lifetime Access Non-Grantor Trust) is the converted, non-grantor version required for QSBS treatment at exit. The conversion is a standard part of exit preparation that Promissory manages.

Yes. Our trusts are designed to withstand IRS scrutiny, acquiring company legal review, and M&A due diligence. Multiple Promissory founders have exited with our trusts in place. We provide all required documentation for the diligence process and coordinate with your M&A attorneys.

The setup fee covers up to four trusts, but you’re not required to use all four. Some founders start with two and add more before a future fundraise. Your initial consultation will help you decide what makes sense now versus later.

When you transfer stock to a trust, you’re making a taxable gift in the eyes of the IRS. You’re required to report it on Form 709 and substantiate the value of the shares gifted. Without a qualified appraisal, you have no defense if the IRS challenges the value.

No, though they share similar methodology. A 409A valuation is for equity compensation and option pricing purposes. A gift and estate valuation is conducted specifically for gift and estate tax reporting, under IRC §2512 and Revenue Ruling 59-60. The standard of value, scope, and use of the report are distinct.

A standard 409A doesn’t satisfy the gift and estate valuation requirement. It was prepared for a different purpose under a different standard. A new report, prepared specifically for gift and estate purposes, is required for your Form 709.

Very. The comprehensive report covers your company’s financial analysis, market analysis, industry and competition, valuation approaches (income, market, asset), equity allocation methodology, and DLOM analysis. It also includes the conclusion, assumptions, appraiser qualifications, and certification.

A properly prepared report by a qualified appraiser under the correct standard is your strongest defense. Our reports include full methodology documentation, appraiser certification, and supporting analysis — everything needed to substantiate the conclusion.

The valuation is dated to the date of the gift. The sooner you act, the lower your reported gift value and the more appreciation is captured inside the trust. If your share price has risen substantially, it’s worth having a consultation to determine whether QSBS trusts still make sense for your situation.

Each separate gift requires its own valuation as of the date of that gift. If you transfer additional shares later, a new valuation and Form 709 are required.

It’s not legally required, but it’s practically essential if you want to be able to substantiate your QSBS exclusion. An attestation letter is the standard documentation used to confirm QSBS eligibility for tax filings, due diligence, and investor requests. Without one, claiming the exclusion becomes much harder to defend.

They serve different purposes. Your gift and estate valuation establishes the fair market value of your shares at the time you gifted them to a trust. This is required for your Form 709. The QSBS attestation confirms that your company’s stock qualifies for the Section 1202 exclusion, and documents that status at a specific point in time.

You can request a one-time letter when needed, but a retroactive letter is far less defensible. Attestation creates documentation of your QSBS status as it exists now, which is a much stronger position than a letter reconstructed after a question has already arisen.

Attestation creates a formal, third-party-documented record. The distinction matters in due diligence and in any IRS inquiry. Acquirer counsel and the IRS aren’t going to take your word for it.

The attestation is issued at the company level, confirming the company's QSBS status. Shareholder-level statements are then generated for each trust individually, documenting which specific shares held by that trust are QSBS-eligible. Both are included.

Yes. Many founders choose to start with an attestation before proceeding with trusts. Your attestation gives you a defensible base for your QSBS position, whether you decide to leverage trusts with Promissory or not.

No. Our tax filing service is designed specifically for Promissory trust clients. The value is in the coordination between your trust structure and your personal return. That context only exists if we’re managing your trusts.

Your trust tax returns (Form 1041) are included in your Promissory trust setup and annual fee, not part of this add-on. This covers your personal return (Form 1040) and the planning that goes with it.

This covers up to two of each. If your situation is more complex—more states, more K-1s, or other complicating factors—we’ll discuss your situation before you enroll.

You can add tax filing at any point after setting up your trusts. Most clients add it when they’re approaching a new tax year or after their first trust filing.

If you expect to owe more than $1,000 in federal taxes for the year and your withholding doesn’t cover it, the IRS expects you to pay quarterly. Founders who miss these payments face penalties. Our personal tax filing service offers guidance on what to pay and when.

Your advisor is available year-round to help you think through financial decisions, not just taxes. That includes how equity compensation affects your tax picture, how to think about liquidity planning before and after your exit, and coordination with your trust strategy. They’re a resource, not just someone who shows up in April.

Everything needed to properly structure QSBS trusts:

QSBS planning works best when trusts are established while share prices and valuations are still low. Waiting typically means higher valuations and reduced planning flexibility.

Trusts require ongoing administration and compliance. Annual fees cover professional Nevada trustee services and trust maintenance.

We offer a 30-day money-back guarantee if Promissory isn’t the right fit.

Financial advisors, tax professionals, and attorneys working with founders may be eligible for partner pricing and platform access. Contact us below.