Most Founders Think About This Too Late

VICKERY LAW PLLC  |  ASSET PROTECTION

By Chad Vickery · Founding Partner, Vickery Law PLLC

If you are building a company, most of your attention goes where it should: the product, the team, the next round, the customers. The value you are creating sits in your equity, and for a long time that equity is mostly potential. Then one day it is not. A sale, an acquisition, a secondary, and a number that lived on a cap table becomes real money.

Two questions tend to arrive with that money. How much of it survives taxes? And what happens to it after you? Founders who think about these questions early often have more options than founders who wait until a term sheet is on the table. Not because early planning guarantees a better result, because it does not, but because some of the most useful tools only work if they are in place well before a sale.

This piece walks through one family of those tools at a high level: the qualified small business stock rules, and the trust structures that founders sometimes pair with them. It is general information, not advice, and whether any of it fits your situation depends on facts this article cannot know. The concepts are still worth understanding before you need them.

A tax rule built for small companies

Federal law includes a provision, often shortened to QSBS, that can let the owner of certain qualifying small business stock exclude a portion of the gain from federal tax when the stock is sold. The word that matters is exclude. This is not a deduction that trims your taxable income. When the requirements are met, a slice of the gain simply does not count as income at all.

There are conditions. The company has to meet specific tests, the stock has to be held for a required period, and the benefit is capped, generally on a per-taxpayer, per-company basis. The rules are set by statute, they carry technical requirements that are easy to trip, and Congress has revised them more than once in recent years. Whether a given block of stock qualifies, and how much of a gain the cap reaches, depends on the details and on the law in effect at the time. None of it is automatic.

Why a trust enters the picture

Here the planning gets more interesting, and more demanding. Because the cap applies per taxpayer, some founders look at whether more than one taxpayer might hold qualifying stock. An irrevocable trust, if it is structured as its own separate taxpayer, is one such taxpayer. Spreading qualifying stock across several genuinely separate trusts may, in some cases, allow each to look to its own cap rather than sharing yours. Planners sometimes call this stacking.

The idea is only as strong as the separateness behind it. The benefit depends on the trusts being real and distinct, from each other and from you. Structures that are functionally identical, or that leave you holding strings, can be collapsed and treated as a single taxpayer, which defeats the purpose. This is not a loophole to be exploited casually. It is a structure that has to be built carefully and honestly, or not at all.

There is a second reason founders look at trusts, separate from income tax. Appreciating stock left in your own name keeps growing inside your taxable estate, where it can be taxed again at death. Moving stock out of your estate by completed gift, before the large appreciation happens, can keep that future growth from being taxed a second time. But "completed gift" means what it says. To move an asset out of your estate, you generally have to give up the ability to reach it, redirect it, or decide who ultimately receives it.

The tradeoff nobody can plan around

That last point is where founders feel the friction, and it is worth stating plainly:

The tax advantages exist because the trust is genuinely separate from you. The limits are not lawyer caution. They are the price of the benefit.

When a structure feels strict, that strictness is usually the thing doing the work. The moment the law would treat a trust as just another one of your pockets, the advantage it was built to capture tends to disappear. So the real question these tools pose is not "more control or less control." It is closer to this: how much benefit are you trying to capture, and what are you willing to give up to capture it?

Keeping a safety net

Giving up control is easier to accept when your household does not lose access entirely. One common approach is a trust your spouse can draw on during their lifetime, sometimes called a spousal lifetime access trust. You give the asset away, but not to strangers, and the household keeps a safety net even though the stock has legally left your hands.

Making that work without quietly pulling the asset back into your estate takes a specific piece of engineering. Access to the trust generally has to run through your spouse, and an independent trustee rather than through you, and a person with their own real stake in the trust often has to stand in the path of distributions. Because that person has something to lose whenever money goes out, the law stops treating your spouse's access as if it were yours. Their genuine self-interest is what breaks the chain back to you. It can feel like bureaucracy. It is closer to a load-bearing wall.

The choices that are genuinely yours

Structures like these involve a handful of decisions that no template can make for you, because they are about your family rather than the tax code. Who should hold a real stake in the trust, and how large should it be? How much access should a spouse have, and for what? What should children or other descendants receive, and when? What should happen if a spouse later remarries? These are value questions as much as legal ones. Good planning does not answer them for you. It surfaces them clearly, explains the tradeoffs, and builds to match the choices you make.

Whether any of this fits you

None of these tools is right for everyone, and none of them is free. They involve real costs, decisions that are difficult or impossible to reverse, ongoing administration, and a genuine surrender of control. They also depend on requirements and tax laws that are technical, fact-specific, and subject to change. For some founders the fit is strong. For others, it is not, and recognizing that early is worth something in itself.

What is generally true is that the most useful version of this planning happens before a sale is in view, while there is still room to structure things deliberately rather than in a hurry. If you are building something you expect to grow, it is worth understanding the landscape early and talking through your own circumstances with counsel and a tax advisor who can review the actual facts.

Hard-won shouldn't be easily lost. The work is not about clever tricks. It is about understanding the tradeoffs clearly enough to make the decisions that are yours to make.

Chad Vickery Founding Partner, Vickery Law PLLC

Vickery Law PLLC advises entrepreneurs and equity-compensated professionals on estate planning and asset protection. Licensed in MD, DC, and WA.

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This article is published by Vickery Law PLLC for general informational purposes and reflects the views of the author. It is not legal or tax advice, does not create an attorney-client relationship, and should not be relied upon as a substitute for advice from qualified counsel regarding your specific circumstances. Qualified small business stock treatment, trust structures, and estate and gift tax outcomes depend on facts particular to you, your company, and the timing of events, and on tax laws that change over time. No particular result is promised or guaranteed. © 2026 Vickery Law PLLC. All rights reserved.