Lifetime gifting to an irrevocable trust can save income tax in addition to providing a shelter from gift and estate taxes.

Transferring qualified small business stock (“QSBS”) to an irrevocable trust creates optionality for multiplying the $10,000,000 QSBS exclusion from capital gains through a mechanism allowing for carve-offs from the original grantor trust to create new non-grantor trusts, with each new trust eligible for its own $10,000,000 QSBS exclusion.

The best time to consider setting up such a structure is in the early stages of the company’s growth (allowing for the capture of greater appreciation within the trust and outside of the taxable estate), and well in advance of an exit (to minimize the risk of the trust structure not working as intended).

Thank you to this week’s newest Tax Tracker contributor Debbie R. Dembinsky!

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