Chapter 5 of 8
Maintaining Investment Authority: Governance & Allocation Playbook
Chapter Summary
Governance levers and allocation strategies founders can use to retain investment authority while remaining within QSBS and fiduciary guard-rails.
Course Progress
Successful QSBS planning does not end with funding the trust. Founders still need to steer investments, honour fiduciary duties, and stay inside IRS guard-rails. Nevada’s directed-trust regime supplies the levers; this chapter shows how to pull them.
Governance Toolkit: Who Holds Which Lever
| Strategy | Mechanics | Why It Preserves Investment Authority |
|---|---|---|
| Investment-Adviser Seat | Founder (or family office) serves as Investment Trust Adviser (ITA) with veto/approval over allocations, proxy votes, and M&A outcomes. | Keeps strategic decisions in founder hands without re-triggering grantor status. |
| Entity Wrapper | Trust owns a manager-managed LLC or LP; founder remains manager/GP. | Separates economic ownership (trust) from operational command (manager/GP). |
| Dual-Class Stock | Gift non-voting Class B QSBS; retain super-voting Class A outside the trust. | Freezes estate value; founder keeps board influence and voting power. |
| Trustee Sign-Off | Independent Nevada trustee records and countersigns every ITA direction. | Creates audit trail and prudent-investor compliance, reinforcing non-grantor posture. |
Bridge to Allocation: The same levers that safeguard investment authority before liquidity also dictate where sale proceeds land after liquidity.
Post-Liquidity Allocation Matrix
| Capital Bucket | Fit for a Dynasty QSBS Trust | Guardrails & Authority Path |
|---|---|---|
| Replacement QSBS | § 1045 roll into new qualified C-corp within 60 days | ITA proposes; trustee confirms QSBS status and clocks holding period. |
| Public Markets | ETFs, blue-chips, Treasuries for diversification and cash management | ITA implements under Investment Policy Statement; trustee books transactions. |
| VC / PE Funds | Extends founder’s domain expertise for heirs | ITA allocates; trustee ensures third-party valuations and K-1 flow-through. |
| Direct Real Estate | Inflation hedge and income stream | ITA (or property manager) sources deals; trustee signs deeds, holds titles. |
| Beneficiary Loans | "Family bank" for education, housing, seed capital | Distribution Adviser approves; trustee documents note ≥ AFR, secures collateral. |
| Premium-Financed Life Insurance | Estate-tax liquidity and long-duration arbitrage | ITA evaluates policy; trustee signs collateral assignment; Crummey notices issued. |
| Founder’s Next Start-Up | Arm’s-length equity or debt participation | ITA proposes; independent valuation + trustee minutes document duty-of-loyalty review. |
One-Page Compliance Checklist
- Document Every Direction: ITA instructions routed through the trustee; keep minutes and trade tickets.
- Match Levers to Buckets: e.g., entity wrapper for real-estate SPVs, dual-class recap before gifting QSBS.
- Confirm Non-Grantor Status Annually: CPA reviews fiduciary segregation and distribution patterns.
- Review IPS Post-Liquidity: Update risk bands and liquidity targets after a major exit.
- Audit State Nexus: Trustees, ITA, records remain outside non-conforming states (e.g., California).
Handled methodically, these levers let the founder exercise investment authority from seed-stage to multi-asset portfolio without undermining the tax and creditor protections earned in Chapters 1–3. Chapter 6 turns to beneficiary and grantor rights, showing how the same governance spine protects family members across generations.