Trust Stacking: Silicon Valley's Favorite Tax Hack Is Drawing Federal Fire

A rapidly growing tax strategy called 'trust stacking' is letting tech founders and angel investors multiply a single $15 million capital gains exclusion into $60 million or more — and the Trump Treasury Department is now signaling a crackdown. The strategy exploits Qualified Small Business Stock (QSBS) rules, a 1993 law designed to encourage startup investing by allowing founders to exclude up to $15 million in capital gains from federal taxes. By transferring shares early — when they're worth almost nothing — into multiple nongrantor trusts for relatives or beneficiaries, founders can stack the exclusion across several separate taxpayers, each claiming their own $15 million shield.

The math is seductive. A founder facing a $60 million exit who would otherwise owe up to 23.8% in capital gains taxes can potentially pay nothing by splitting the gain across a founder account and three trusts. The law explicitly permits transfers of shares to other taxpayers who can then claim their own exclusion, which has emboldened an entire advisory ecosystem. GetDynasty, a Nevada trust company founded by Alessandro Chesser, offers QSBS packages for up to four trusts and has signed up 500 clients in just 10 months.

The scale of QSBS usage has exploded. The Joint Committee on Taxation estimates the break will cost the federal government $4.9 billion in revenue in fiscal year 2026 — more than triple its 2017 cost. Between 2012 and 2022, taxpayers claimed a cumulative $140 billion in QSBS exclusions, according to a 2025 Treasury study. Trusts and estates now account for 17.5% of QSBS claims, a dramatic jump from a decade ago. The 2025 tax law sweetened the deal further, raising the cap to $15 million from $10 million for stock acquired after July 4, 2025.

Treasury's top tax policy official, Kenneth Kies, issued an unusually blunt public warning last month: 'Let me just warn you — we don't like stacking.' The administration is expected to propose new rules targeting the most aggressive structures, particularly those where trusts are set up for overlapping combinations of the same beneficiaries — for example, a founder creating trusts for children John, Jane, and Joan individually, plus additional trusts for pairs like John-and-Jane or John-and-Joan. That kind of layering, Kies suggested, crosses into territory the government will challenge. The IRS is already auditing cases where trusts were set up just before a company sale.

Tax advisers are urging caution. One adviser turned away two brothers who had designed an 18-trust structure where they could later be added as beneficiaries themselves after an exit — a setup he called straightforwardly self-serving. The key defensive move for those who do proceed: transfer shares at the earliest possible stage, document genuine estate-planning rationale, and avoid any planning timed to an imminent sale. The lack of comprehensive IRS regulations on QSBS has left the space effectively ungoverned for years, but that window appears to be closing.