Kenneth Kies, the Treasury Department’s top tax-policy official, warned last month that officials “don’t like” the practice known as trust stacking and will likely propose rules targeting it. “People are going beyond that and they’re setting up other trusts,” Kies told reporters. “It’s something we’re taking a close look at.”
At issue is the Qualified Small Business Stock exclusion, or QSBS, which allows founders and investors to avoid what would otherwise be as much as a 23.8% tax on the sale of shares in qualifying small companies. Created in 1993 and expanded since then, the break enjoys bipartisan support tied to small business investment and entrepreneurship. Last year’s tax law raised the exclusion cap to $15 million from $10 million for stock acquired since July 4, 2025, and increased the maximum size of companies that count as small businesses. Stock must be held for five years for the full exclusion.
Trust stacking multiplies the break’s benefits by transferring shares to multiple nongrantor trusts — each regarded as a separate taxpayer — when the stock is worth next to nothing. At exit, the $15 million exclusion applies to the founder and each trust, potentially eliminating taxes on gains of $60 million or more. The law explicitly allows investors to transfer shares to others and have each taxpayer qualify for an exclusion, which advisers say has made stacking a core part of founders’ early planning.
The break is estimated to reduce federal revenue by $4.9 billion this year, according to the congressional Joint Committee on Taxation, more than triple its 2017 level. From 2012 through 2022, taxpayers claimed QSBS exclusions of $140 billion, according to a 2025 Treasury Department study. Exclusions peaked in 2021 at about 2.5% of all capital gains. That year, trusts and estates made 17.5% of QSBS claims, far more than a decade earlier.
A cottage industry of advisory firms has emerged to facilitate stacking, attracting clients with advertising and lower trust fees than what attorneys typically charge. Alessandro Chesser started GetDynasty, which offers QSBS packages for up to four trusts. Chesser said his firm, set up as a Nevada trust company, has aided 500 customers in 10 months. “Giving away money to other people is a really good thing,” he said. “It’s about redistributing your wealth. Who do you actually want to give your wealth to?” Michael Arlein, a trusts-and-estates lawyer at Patterson Belknap in New York, said he is “definitely doing more QSBS stacking” and is confident his approaches fit within the law and any possible Treasury rules.
The Treasury Department and the IRS have never published comprehensive regulations on the break, and there has been minimal guidance from courts, leaving the break without effective guardrails, said Manoj Viswanathan, a professor at UC Law San Francisco. Viswanathan described the effectively unlimited stacking as absurd and argued the incentive does not do much to increase entrepreneurship. “You’re kind of emboldened. No one’s even come close to the line,” he said.
In advance of details from the Treasury Department, tax advisers have been urging clients to exercise caution. Paul Lee of Consiglio Advisors said he reviewed a plan for two unmarried childless brother co-founders who had set up 18 trusts between them, structured so a supposedly independent committee could decide to add the brothers as beneficiaries after the exit. “I told them not to do it,” Lee said. “If the only motivation is just to multiply the $15 million per taxpayer exclusion just for the benefit of themselves, that’s where it goes too far.”
Daniel J. Studin, a trusts-and-estates lawyer at Morrison Cohen in New York, said the IRS is pursuing cases in audits that look more like tax avoidance than legitimate planning, such as people who set up trusts just before selling their company. “Planning around this that is done at the time of a binding letter of intent is not going to be successful,” Studin said. James Creech of tax and advisory firm Baker Tilly cautioned against aggressive structuring. “I worry when people start veering into the tax lane and saying look how powerful this tool can become and what we can do,” Creech said. “There’s so many ways for this to go wrong.”