Trust and Inheritance Planning for Tech Founders After an Exit Effective trust planning for tech founders after an exit depends on acting before the wire clears: once your shares turn to cash, the US charges estate and gift tax at 40%, and the UK adds inheritance tax at 40%, so a well-timed trust can move […]
Effective trust planning for tech founders after an exit depends on acting before the wire clears: once your shares turn to cash, the US charges estate and gift tax at 40%, and the UK adds inheritance tax at 40%, so a well-timed trust can move millions out of both nets while you still control the outcome.
By the Jungle Tax Cross-Border Tax Team — reviewed by a US-UK dual-qualified adviser (CPA / Enrolled Agent).
The moment illiquid equity becomes liquid wealth, two tax authorities take an interest in what happens when you die. The United States levies estate and gift tax at a flat 40% on transfers above the unified exclusion, which the One Big Beautiful Bill Act (Public Law 119-21, signed 4 July 2025) set at a permanent $15 million per person for 2026, indexed thereafter. The United Kingdom charges inheritance tax (IHT) at 40% on estates above the £325,000 nil-rate band, with a further £175,000 residence nil-rate band where a home passes to direct descendants.
Founders with a foot in each country face both regimes at once. A UK-resident American, or a British founder holding US-situs stock, can find the same pound taxed twice unless the estate is structured around the US-UK estate and gift tax treaty. Our guide to US-UK dual tax residency explains in more detail how the two systems overlap. This is why trust planning tech founders after an exit should begin months before completion, not in the year the money lands.
Before the sale, your shares are undervalued and have a strong growth story. That combination is the single most valuable gifting opportunity you will ever have. Gift or sell shares into a trust while they are worth a fraction of the exit price, and every pound of subsequent appreciation happens outside your taxable estate. Wait until the cash arrives, and you are moving fully valued assets, using up the exclusion at par and losing the leverage entirely.
Consider the arithmetic. Gift shares worth $2 million into an irrevocable trust a year before a sale that values the same stake at $20 million, and you have removed $18 million of growth from your estate for the price of $2 million of exclusion. Do the same gift after completion, and you will spend $20 million on the exclusion for the same asset. At a 40% marginal rate, that timing difference alone is worth more than $7 million to your heirs. The lesson is blunt: valuation, not sentiment, drives the calendar.
|
Regime |
Headline rate |
2026 exemption/threshold |
Trigger |
|---|---|---|---|
|
US estate & gift tax |
40% |
$15m per person (unified) |
Citizenship/domicile / US-situs assets |
|
US GST tax |
40% |
$15m per person |
Transfers skipping a generation |
|
UK inheritance tax |
40% |
£325k + £175k RNRB |
Long-term UK residence / UK-situs assets |
No single vehicle solves everything; the right structure depends on your citizenship, your residence, and whether you want to retain any economic benefit. Below are the four workhorses of trust planning tech founders after an exit, each doing a distinct job.
A Grantor Retained Annuity Trust lets you contribute pre-exit shares, take back a fixed annuity, and pass the growth above the IRS hurdle rate to your heirs at little or no gift-tax cost. For a founder expecting a step-change in valuation at completion, a short-term “rolling” GRAT captures that spike efficiently. The catch is mortality risk: die within the term, and the assets snap back into your estate.
An Intentionally Defective Grantor Trust sells assets in exchange for a promissory note. You pay income tax on the trust’s earnings (a further tax-free gift to beneficiaries), while the appreciation escapes estate tax. Pairing an IDGT sale with a pre-exit share valuation is one of the most powerful freeze techniques available.
A Spousal Lifetime Access Trust lets one spouse gift up to the full $15 million exclusion into trust for the other, removing the assets and their growth from both estates. At the same time, the family retains indirect access through the beneficiary spouse. With the exclusion now permanent, SLATs are less of a “use it or lose it” race, but they remain the cleanest way to lock in the allowance for a married couple.
By allocating GST exemption to a long-duration dynasty trust, wealth can cascade through children and grandchildren without a fresh 40% charge at each death. The generation-skipping transfer tax exemption ($15m for 2026) is the lever that makes this possible.
Before you plan the estate, plan the sale. Qualified Small Business Stock under Internal Revenue Code §1202 can exclude a large slice of capital gain on a qualifying domestic C-corporation. The OBBBA rewrote the stock rules issued after 4 July 2025: a tiered holding period gives a 50% exclusion at three years, 75% at four years and 100% at five years; the per-issuer cap rose from $10m to $15m; and the gross-assets ceiling climbed to $75m.
Stacking multiplies the benefit. Because the cap applies per taxpayer, gifting QSBS shares into non-grantor trusts before the exit can create additional $15 million exclusions — one reason trust planning for tech founders after an exit should be coordinated with the deal structure, not bolted on afterward. QSBS is a US-only relief: it does nothing for the UK side, where UK Business Asset Disposal Relief and the treaty must be considered separately. If you hold company options rather than shares, read our note on tax on founder share options before you plan any gifting.
The UK abolished the domicile concept for IHT from 6 April 2025 and moved to a residence-based system. You are now a “long-term resident” — and exposed to UK IHT on your worldwide estate — once you have been UK tax resident for at least 10 of the previous 20 tax years. Leave the UK, and an IHT “tail” of up to ten years can follow you, depending on how long you were resident. We cover the mechanics in our piece on the 2025 non-dom abolition.
For trusts, this is a sea change. The IHT treatment of non-UK assets settled into trust now tracks the settlor’s long-term-resident status at each charge date, so a structure that was outside the UK net when created can be dragged in later. Relevant-property trusts also face their own IHT rhythm: an entry charge of up to 20%, a principal charge of up to 6% every ten years, and exit charges when capital leaves. Cross-border trust planning tech founders after an exit must model these UK charges alongside the US rules, because a vehicle that is efficient in one country can be punishing in the other.
The US-UK estate and gift tax treaty allocates taxing rights and grants credits so the same asset is not taxed at full rate twice. It also extends a marital-deduction-style relief in mixed-nationality marriages that US domestic law alone would deny. Reading the treaty and the two domestic codes together is where cross-border planning earns its keep.
A trust that looks efficient in London can be a compliance minefield for a U.S. person beneficiary. Foreign non-grantor trusts are subject to the “throwback” rules, which tax accumulated income distributed in later years at punitive rates plus an interest charge. US beneficiaries and settlors must also file Form 3520 and Form 3520-A, with penalties starting at 35% of the transfer or distribution for failures. Our overview of US foreign trust reporting walks through the filing calendar.
Assets in a US taxable estate generally receive a basis step-up to date-of-death value, wiping out unrealized capital gain — a benefit that aggressive lifetime gifting can inadvertently forfeit. This creates a genuine tension: shift an asset out of your estate early, and you dodge the 40% estate tax, but your heirs may inherit your original low basis and face capital gains tax when they sell. The right answer turns on the size of the expected gain, the beneficiaries’ own residence, and how long the trust is likely to hold. There is no default; each asset has to be weighed on its facts.
Where a spouse is not a US citizen, the unlimited marital deduction does not apply, and a Qualified Domestic Trust (QDOT) is usually needed to defer the estate tax. A QDOT must have at least one US trustee, and distributions of capital during the spouse’s lifetime can trigger the deferred tax. These interactions are precisely why one-size-fits-all templates fail founders.
An anonymized client — a dual US/UK citizen, long-term UK resident, married to a British non-US citizen) Spouse— was 12 months away from selling her SaaS company for roughly £40 million. Working before completion, we sold a tranche of her shares to an IDGT at the pre-exit valuation, allocated GST exemption to make the trust multi-generational, and structured a QDOT provision for her spouse. Two family members funded rolling GRATs. On the US side, part of the founder stock qualified for §1202, and gifting shares into non-grantor trusts before the sale multiplied the per-issuer exclusion. The result: an estimated £9m of combined US and UK estate exposure removed, QSBS relief preserved, and full compliance with Form 3520 reporting — all achieved because the planning happened before, not after, the money moved.
Every figure in this article adjusts based on your citizenship, residence, and deal timeline, and the biggest savings vanish once the completion date passes. If you are approaching an exit, talk to us while the planning window is still open.
Email hello@jungletax.co.uk | Call 0333 880 7974 | Visit jungletax.co.uk
How long before an exit should I set up a trust?
Ideally, six to twelve months. Effective trust planning for tech founders after an exit relies on the transfer of shares. At the same time, they still carry a low, pre-sale valuation, because that is what allows future appreciation to grow outside your taxable estate. Once a term sheet fixes the price, much of the leverage is gone.
Does the US $15 million exemption mean I owe no estate tax?
Not necessarily. The $15 million per-person exclusion for 2026 applies to your worldwide estate, but the UK still charges IHT at 40% above £325,000, and a successful exit can quickly exceed both thresholds. The two systems interact through the US-UK treaty rather than canceling each other out.
What is a GRAT and why do founders use one?
A Grantor Retained Annuity Trust lets you contribute shares, receive a fixed annuity back, and pass growth above the IRS hurdle rate to heirs at minimal gift-tax cost. Founders favor short “rolling” GRATs around an exit because they efficiently capture a sudden jump in valuation.
Can a UK resident benefit from QSBS?
QSBS under §1202 is a US federal relief tied to a domestic C-corporation, so it only shelters US capital gains tax. A UK-resident US person may still claim it on the US side, but the UK will assess its own capital gains and inheritance tax separately, subject to treaty relief.
How did the April 2025 UK reforms affect trusts?
The UK replaced domicile with a residence-based IHT test from 6 April 2025. Non-UK assets in a trust are now caught based on whether the settlor is a “long-term resident” — UK tax resident for 10 of the previous 20 years — at each charge date, so previously excluded structures can fall into the UK net.
