Chapter 6 of 8
Rights & Protections: Beneficiaries vs. Grantor
Chapter Summary
Explore how a Dynasty QSBS Trust balances empowerment and protection for heirs while preserving non-grantor status for the founder.
Course Progress
A Dynasty QSBS Trust must walk a narrow line: empower heirs and protect them, yet avoid giving the founder so much influence that the trust slips back into grantor status. Nevada’s directed-trust statutes and carefully drafted terms keep that balance. Use the matrix below as your quick reference, then review the nuance that follows.
Consolidated Rights Matrix
| Who | Right / Authority | Practical Guardrails |
|---|---|---|
| Beneficiaries | Distributions for HEMS + Specific Needs | Only on written approval of the Distribution Adviser; trustee verifies requests and records rationale. |
| Beneficiaries | Access to Information | May request reasonable accountings; delivered via trustee dashboard or annual report. |
| Beneficiaries | Limited Power of Appointment | Exercisable by primary beneficiaries via will; cannot redirect assets back to the grantor. |
| Beneficiaries | Fiduciary Oversight | At age 25, may petition to remove a negligent trustee or adviser; must show breach of duty. |
| Beneficiaries | Spendthrift Protection | Assets unreachable by personal creditors until actually distributed. |
| Grantor | Investment Authority (ITA Seat) | Retained as Investment Trust Adviser; all directions countersigned by Nevada trustee to document non-grantor posture. |
| Grantor | Entity Structuring Rights | May serve as manager/GP of trust-owned LLCs/LPs; economic ownership stays in trust. |
| Grantor | Voting Control | Holds super-voting Class A shares outside the trust; trust receives non-voting Class B. |
| Grantor | Initial Appointment Power | Selects first ITA and Trust Protector; no unilateral power to reinstall self as beneficiary. |
| Grantor | Indirect Amendments | Benefits from Protector’s tax-efficiency tweaks; cannot expand own economic rights. |
Why These Lines Matter
- Separate Taxpayers, Separate Caps: By limiting the grantor to investment authority and keeping distribution discretion elsewhere, each trust remains a non-grantor taxpayer (critical for multiplying § 1202 caps explained in Chapters 1–3).
- Protection Without Handcuffs: Spendthrift provisions lock down assets until the Distribution Adviser authorises a release, shielding wealth from divorces, lawsuits, and youthful indiscretions.
- Transparent Accountability: Information rights plus the age-25 fiduciary oversight trigger give beneficiaries a safety valve without inviting day-to-day second-guessing of the ITA or trustee.
- Future-Proof Flexibility: The Trust Protector’s powers (amending technical clauses, shifting situs, replacing fiduciaries) ensure the structure adapts to new tax law (OBBBA is unlikely to be the last rewrite).
Operational Checklist
- Distribution Requests → Routed to Distribution Adviser ➜ Trustee logs decision.
- ITA Directives → Document trade tickets; trustee countersigns.
- Annual Review → CPA confirms non-grantor status, spendthrift integrity, and state-tax posture.
- Protector Audit → Every 3–5 years, evaluate whether situs or fiduciary slate should change.
When rights are calibrated this way, the trust protects beneficiaries and the founder's strategic vision, all while satisfying the IRS that each trust is its own taxpayer. Chapter 7 explores the Rockefeller Waterfall strategy for perpetual liquidity and principal preservation, while Chapter 8 closes the loop with lifecycle management: amendments, situs migrations, and eventual wind-down procedures.