Steve Lockshin

Jun 11, 2025

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The Estate Planning Hierarchy for Wealthy Families: A Practical Guide for Advisors

For advisors working with very wealthy families, understanding the hierarchy of estate planning tools is essential to structuring optimal, tax-efficient, and flexible multigenerational plans. Here’s a practical framework to guide your thinking.

To dive deeper, download How Vanilla Helps Advisors Plan Across Generations here.

Start at the top: GST-exempt trusts

Generation skipping transfer tax-exempt trusts are the gold standard for multigenerational wealth transfer. When properly structured, a GST-exempt trust:

• Is exempt from transfer taxes for generations—forever
• Can include a spouse as a beneficiary, providing flexibility and access
• Is highly effective for multi-generational planning when situs is established in favorable jurisdictions (like Nevada, Delaware, or South Dakota) that offer dynastic structures and strong creditor protections

If clients are hesitant to give away assets, consider structuring a GST-exempt trust  as a spousal lifetime access trusts (SLAT), where a spouse is a potential beneficiary, or a hybrid Domestic Asset Protection Trust (DAPT), where the client may be added as a potential beneficiary in the future, in order to preserve flexibility.

Next best: Non-exempt irrevocable trusts

A GST non-exempt trust is a trust that is outside the client’s taxable estate but is not exempt from the generation-skipping transfer tax (GSTT).  This means that if distributions are made from the trust to an individual who is more than one generation below the client, the distribution  will be subject to the GST tax at a rate of 40%. A GST non-exempt trust can be useful when the GST exemption has already been used or the plan doesn’t require multigenerational transfer.  They are often used as the recipient of grantor retained annuity trust (GRAT) residual outcomes.

Better than nothing: Revocable trusts

If neither of the first two options are available for your clients, a revocable trust is better than no trust at all. Revocable trusts don’t remove assets from the estate, but they can:

• Avoid probate and increase privacy of wishes at death
• Support incapacity planning
• Enable better asset management and control

In short: Any type of trust is better than owning assets individually, but a revocable trust is not a transfer tax-saving solution – at best it can defer transfer taxes to a surviving spouse’s death.

Technique hierarchy: What you put In the trust matters

Not all asset transfers are created equal. Here’s a ranked list of wealth transfer techniques from most to least impactful:

• Gifting illiquid or unmarketable assets (e.g.,  an interest in a closely held entity or business)
• Selling assets to defective grantor trusts
• Using GRATs or CLATs to freeze value and transfer appreciation out of the estate
• Advanced idea: Selling the remainder of a GRAT to a GST-exempt trust (not often used and technically nuanced)

The goal is to maximize use of GST-exempt space first, while using freeze techniques for assets that don’t align with outright transfers.

Pulling it all together

Advisors should pair technical strategies with flexible trust design. Trusts that allow a spouse to benefit, that permit decanting and change of situs, and consider future migration are all part of staying agile as laws and family needs evolve.

Planning for wealthy families is not just about saving taxes—it’s about building structures that last. Start with the proper hierarchy, use the right tools, and layer in flexibility to serve families for generations.

Download our guide, How Vanilla Helps Advisors Plan Across Generations, to learn more on this topic.

The information provided here does not constitute legal, financial, or tax advice. It is provided for general informational purposes only. This information may not be updated or reflect changes in law. Please consult with an estate attorney, financial advisor, or tax professional who can advise as to your particular situation.