Trust Strategies That Actually Make Sense for Families Under $20M

Why Most Trust Advice Does Not Apply to Families Under $20M

Most trust planning content is written for families with $50 million or more. The strategies are real, but they do not apply to the majority of affluent households. If your net worth is between $3 million and $20 million, you need a different playbook: one that balances tax efficiency with simplicity, and estate protection with the flexibility to access your own money.

I work with families in this range every day. The right trust structure depends on your state, your family dynamics, your asset mix, and what you are actually trying to accomplish. Here is a practical guide to the trusts that matter at this level.

Do You Need a Revocable Living Trust?

A revocable living trust is the starting point for most families. It does not save you a dollar in taxes. Its purpose is probate avoidance, privacy, and continuity.

When you die, assets held in a revocable trust transfer to your beneficiaries without going through probate court. In states like California, where probate fees are based on a percentage of the gross estate, this alone can save tens of thousands. In Arizona, probate is less expensive, but the delay (6 to 12 months) and public nature of the process still make a revocable trust worthwhile for most families above $1 million.

The other benefit is incapacity planning. If you become unable to manage your affairs, the successor trustee steps in immediately without a court proceeding. Compare that to a power of attorney, which financial institutions sometimes refuse to honor.

When it makes sense: Almost always, for any family with real estate, investment accounts, or business interests above $1 million. I explain the differences between revocable and irrevocable trusts in detail here.

When it is overkill: It rarely is, given the cost ($2,000 to $5,000 to set up). But if your estate is simple, under $500,000, and in a state with inexpensive probate, a will with beneficiary designations may be sufficient.

Spousal Lifetime Access Trust (SLAT): The Estate Tax Workhorse

A SLAT is an irrevocable trust where one spouse is the grantor and the other spouse is the beneficiary. The grantor makes a gift to the trust (using their estate tax exemption), removing those assets from their taxable estate. But because the other spouse is a beneficiary, the family retains indirect access to the funds.

This is the strategy I use most often with married couples whose estates are between $7 million and $20 million. It captures the tax benefit of an irrevocable transfer without the feeling of permanently giving up control.

When it makes sense: Married couples with combined estates above $7 million (the post-sunset exemption) who want to lock in the higher exemption. Also useful for families who expect significant asset growth: everything inside the SLAT grows outside the estate.

When it is overkill: If your estate is comfortably below $7 million per person and you do not expect it to grow meaningfully, the estate tax is not your problem. Focus on probate planning instead.

The divorce risk: A SLAT's access benefit depends on the marriage. If the couple divorces, the grantor spouse loses indirect access to the trust. I always discuss this with clients before recommending a SLAT.

Irrevocable Life Insurance Trust (ILIT): Keeping Insurance Out of Your Estate

Life insurance death benefits are included in your taxable estate if you own the policy. For a family with $3 million in life insurance and an estate near the exemption threshold, that $3 million could push the estate into taxable territory.

An ILIT owns the insurance policy instead of you. When you die, the death benefit goes to the trust, not your estate. The trust distributes the proceeds to your beneficiaries according to its terms.

When it makes sense: Families where life insurance is a meaningful part of the estate (usually $1 million or more in face value) and the total estate is approaching or exceeding the exemption. Also useful for creating liquidity to pay estate taxes without forcing heirs to sell illiquid assets like real estate or a business.

When it is overkill: If your estate is well below the exemption and you do not expect it to grow into estate tax territory, the administrative burden of an ILIT (annual Crummey notices, separate trust tax returns) is not worth the cost.

When Does a GRAT Make Sense for Concentrated Stock?

A Grantor Retained Annuity Trust transfers the growth of an asset to your heirs while returning the original value to you through annuity payments. If the assets outperform the IRS hurdle rate (the Section 7520 rate, which changes monthly), the excess growth passes to your beneficiaries tax-free.

I see GRATs used most by executives with concentrated stock positions. If you hold $5 million in employer stock that you expect to appreciate 15% to 20% annually, a GRAT captures most of that growth for your heirs at minimal gift tax cost.

When it makes sense: You hold a concentrated position in an asset you expect to appreciate significantly. Common with pre-IPO stock, rapidly growing company equity, or real estate development projects.

When it is overkill: If your assets are diversified and growing at market-average rates, the GRAT's benefit over a simple gifting strategy is marginal. The legal costs ($5,000 to $15,000) and complexity are hard to justify for a diversified portfolio.

Credit Shelter Trust (Bypass Trust): Still Relevant After Portability?

Before 2011, a credit shelter trust (also called a bypass trust or B trust) was essential for married couples to use both spouses' estate tax exemptions. The first spouse to die would fund a bypass trust up to the exemption amount, preserving that exemption for the surviving spouse.

Portability, introduced in 2010 and made permanent in 2013, allows the surviving spouse to use the deceased spouse's unused exemption without a trust. This reduced the need for bypass trusts in many cases.

But bypass trusts are still useful in specific situations: when you want to protect assets from a surviving spouse's future creditors, when you are in a blended family and want to ensure assets pass to children from a prior marriage, or when the estate is large enough that shielding growth from estate tax matters more than the step-up in basis at the second death.

When it makes sense: Blended families, estates where asset protection for the surviving spouse is a concern, or when the estate is large enough that tax savings outweigh the lost step-up in basis.

When it is overkill: First marriages with estates comfortably below the combined exemption. Portability is simpler and preserves the step-up in basis. I recommend portability for most couples in the $5 million to $10 million range unless there are specific asset protection concerns.

Which Trust Structure Is Right for Your Family?

When I sit down with a family, the trust conversation starts with three questions:

• What is your estate worth today, and where is it headed? If you are at $5 million and growing modestly, a revocable trust handles probate and incapacity. If you are at $12 million and growing, the estate tax conversation becomes urgent.
• What are you trying to protect against? Probate? Estate taxes? Creditors? A spendthrift heir? Each concern points to a different structure.
• How much access do you need to retain? If you cannot afford to part with assets permanently, SLATs and revocable trusts maintain access. GRATs return the principal to you. Outright gifts and dynasty trusts do not.

It helps to identify which factors are relevant to your situation before we talk. I use that as a starting point with many of my clients to frame the conversation around what actually matters for their family.

You can also read more about how I approach trust and estate planning across the families I work with.