Chapter 2 of 8
The Nevada Non-Grantor, Directed Trust Blueprint
Chapter Summary
Understanding the Nevada Non-Grantor, Directed Trust structure and why it's engineered to multiply the §1202 exclusion while letting founders retain investment authority.
Course Progress
A Dynasty QSBS Trust is not a generic revocable living trust with a new label. Its tax status (non-grantor) and governance model (directed) are engineered to do one thing better than any alternative: multiply the §1202 exclusion while letting the founder retain investment authority.
At-a-Glance Grid
| Dimension | Key Attribute | Why It Matters for QSBS |
|---|---|---|
| Tax Status Grantor | Income taxed to grantor; assets often included in grantor's estate | QSBS exclusion cannot be stacked; exposure to creditors and estate tax |
| Tax Status Non-Grantor | Trust files its own return; beneficiaries taxed only on distributions | Each trust receives its own §1202 cap, enabling stacking; assets shielded from grantor's creditors |
| Governance Directed (Nevada NRS 163.5548-163.5553) | Trustee follows binding directions from Investment & Distribution Advisers | Founder keeps investment authority without jeopardizing non-grantor status; trustee liability is limited |
| Governance Traditional (Non-Directed) | Trustee holds full discretionary authority | Founder must cede day-to-day investment decisions; slower and less flexible |
1. The Non-Grantor Advantage
A non-grantor trust is treated as a separate taxpayer. When QSBS is gifted into three such trusts (one for each child, for example), the family can exclude $30 million (or $45 million for post-OBBBA stock) instead of a single $10 million / $15 million cap. Because income is reported on the trust's own return, the growth compounds outside the founder's estate and beyond reach of personal creditors.
2. The Directed Framework
Nevada's directed-trust statutes separate fiduciary duties into specialist roles:
- Investment Trust Adviser (ITA): steers allocations, proxy votes, and M&A decisions, allowing the founder to retain investment authority.
- Distribution Adviser: authorises HEMS or other beneficiary payments.
- Directed Trustee: holds legal title and executes instructions with reduced liability.
This segregation of duties satisfies the IRS that the founder no longer owns the assets, yet still enables informed, founder-led investing.
3. Why Nevada?
- No state income tax: trust-level gains (including QSBS) escape state tax entirely.
- Perpetual duration (365 years): supports multi-generational wealth transfer.
- Creditor protection & modern statutes: NRS 163 provides clear authority for advisers, allowing professional trustees to act quickly and confidently.
4. Putting It Together
In practice, a founder forms a Nevada Non-Grantor, Directed trust; gifts QSBS early when valuations are modest; and appoints themselves (or a family office/RIA) as ITA. The trust files its own return, stacks its own §1202 cap, and because investment decisions remain founder-led, continues to support the company's growth trajectory without compromising tax status.
Next up, Chapter 3 explains each fiduciary role in detail and shows how their mandates interlock to protect both compliance and investment agility.