Looking for other trusts? Click here.

Back to Course Curriculum

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.

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

StrategyMechanicsWhy It Preserves Investment Authority
Investment-Adviser SeatFounder (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 WrapperTrust owns a manager-managed LLC or LP; founder remains manager/GP.Separates economic ownership (trust) from operational command (manager/GP).
Dual-Class StockGift 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-OffIndependent 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 BucketFit for a Dynasty QSBS TrustGuardrails & Authority Path
Replacement QSBS§ 1045 roll into new qualified C-corp within 60 daysITA proposes; trustee confirms QSBS status and clocks holding period.
Public MarketsETFs, blue-chips, Treasuries for diversification and cash managementITA implements under Investment Policy Statement; trustee books transactions.
VC / PE FundsExtends founder’s domain expertise for heirsITA allocates; trustee ensures third-party valuations and K-1 flow-through.
Direct Real EstateInflation hedge and income streamITA (or property manager) sources deals; trustee signs deeds, holds titles.
Beneficiary Loans"Family bank" for education, housing, seed capitalDistribution Adviser approves; trustee documents note ≥ AFR, secures collateral.
Premium-Financed Life InsuranceEstate-tax liquidity and long-duration arbitrageITA evaluates policy; trustee signs collateral assignment; Crummey notices issued.
Founder’s Next Start-UpArm’s-length equity or debt participationITA 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.