A Phased Approach to Family Estate Planning

At a glance:

• The main takeaway: Taking a phased approach to estate planning can lessen stress, maximize value-based outcomes, and give families more time to plan.
• Impact on you: Rather than being reactive, you are proactively creating your estate plan, regularly revising it, and leveraging tax strategies that help you build your wealth and estate.
• Next steps: Bringing in professionals not only ensures you receive guidance but also gives you access to the kinds of questions you may not know to ask yourself.

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The full story on estate planning:

Family estate planning can often be a complex and emotionally charged process. A phased approach offers a strategic, step-by-step method that organizes the estate planning process into manageable stages. This structure enables families to address their financial, legal, and personal affairs gradually, rather than attempting to resolve everything at once. One of the key reasons this approach works well is that it aligns with how families naturally evolve. It is easier for people to engage with the process in phases, especially when the idea of tackling estate planning feels emotionally and logistically overwhelming. However, for the phased approach to be truly effective, it is important to start early on. Delaying the process often means missing opportunities.

Like many things, complexity increases when more individuals are affected. For single individuals, the initial planning needs may be relatively straightforward, and typically involve a basic will and essential documents. With marriage, the need for protection evolves to include a spouse, though the planning might remain fairly straightforward. When children enter the picture, estate planning becomes significantly more critical. At that stage, the focus shifts from finances and asset allocation to guardianship and asset protection.

By taking a phased approach, families can build a solid foundation early and adapt their plans as their lives and responsibilities become more complicated.

Phase 1: Foundation

The first phase of estate planning focuses on establishing the essential legal and financial tools that form the backbone of any estate plan. This includes drafting a will and, in many cases, a revocable living trust. Individuals should also designate powers of attorney for both financial and medical decisions and create an advanced healthcare directive to ensure their wishes are respected in the event of incapacity. Having these documents in place provides basic protection and peace of mind, especially for individuals or couples who are just starting out.

Some people may balk at the perceived cost of drafting legal documents, but it is important to note that there are affordable options available. Families can often find attorneys who offer these services at a reasonable rate. Additionally, online legal platforms provide templates for those who prefer a do-it-yourself approach.

At this stage, most individuals or younger couples may not have accumulated significant wealth, so there is typically no need to worry about transferring or protecting large assets. Instead, the focus is on laying a solid legal foundation.

Phase 2: Wealth Accumulation and Managing Risk

As families grow and begin to accumulate wealth, the second phase of estate planning shifts towards protecting those assets and managing potential risks. This stage includes evaluating your life and disability insurance, retirement accounts, and investment strategies. It also includes the introduction of tax planning and, for business owners, the early stages of succession planning.

Once a family has developed complexity beyond the basics (e.g., increased wealth, increased complexity of financial assets, and addition of potential heirs), it becomes essential to assess whether assets should be moved or restructured for protection. This might involve transferring assets into revocable trusts or other legal structures designed to protect them from unnecessary exposure or future complications.

This phase is a critical time to evaluate life insurance coverage. Families should not only consider whether they have adequate protection in place but also review existing policies to ensure they still meet current needs. As financial circumstances evolve, insurance requirements often change, so regular assessments are a must.

Phase 3: Strategic Estate and Tax Planning

In the third phase of family estate planning, the focus shifts to minimizing estate taxes, setting a plan for efficiently transferring wealth and strategically structuring legacies, especially for high-net-worth individuals, business owners, and families with dependents who have special needs. At this point, families often deal with high-value assets that require more sophisticated planning tools and techniques.

Common strategies in this phase include the use of irrevocable trusts, grantor retained annuity trusts (GRATs), spousal lifetime access trusts (SLATs), and family limited partnerships. Families may also explore lifetime gifting, charitable giving, and the valuation of business interests or real estate to help reduce tax exposure and ensure a smooth transfer of wealth.

This phase is undoubtedly the most technically complex and emotionally challenging part of estate planning. Oftentimes, family members are not only confronted with the reality of their mortality but also face many highly technical options. The sheer volume of choices and the complexity of the strategies can be overwhelming, causing some members to disengage or even abandon the process midway.

To address this, estate planning professionals often break this phase into smaller, more digestible phases. This allows families to focus on one issue at a time, such as a specific investment or tax concern, without becoming overwhelmed. Within this phase, there are often “phases within phases” as each family member’s situation may require a tailored approach based on their unique assets and goals.

Phase 4: Succession and Legacy Planning

The fourth phase of estate planning centers on ensuring a smooth transfer of both assets and values to the next generation. At this stage, families should finalize and regularly update succession plans, involve heirs in governance discussions, and begin establishing their shared goals through family mission statements or philanthropic initiatives. This is also the time to consider setting up educational trusts, private foundations, or endowments.

As families grow, it becomes increasingly important to involve the next generation in the planning process, especially adult children and grandchildren who reach a certain age. While estate planning is always individualized, the dynamics shift significantly as wealth accumulates and more people become stakeholders in the family’s future.

The most successful plans are those where children are brought into the conversation, as they often end up serving as executors or trustees, so it is essential that they understand the structure and intent of the plan. This phase is an ideal time to hold family meetings and begin open discussions about financial matters. While many parents instinctively avoid talking about money with their children, age-appropriate financial conversations should happen throughout a child’s life, and they become especially important once children reach adulthood. These discussions not only prepare heirs for their future responsibilities but also encourage them to begin their own financial planning.

Phase 5: Ongoing Family Estate Planning

Estate planning is not and should not be a one-time event. It is and should be an ongoing process that evolves alongside a family’s circumstances (e.g., marriages, births, deaths, or divorces), financial situation, and changes in the law. The final phase of a phased approach to family estate planning emphasizes the importance of regular reviews and timely updates to ensure the plan remains effective and aligned with the family’s goals.

In general, a well-structured estate plan can remain effective for about three to four years without major revisions, assuming no major life changes occur. However, we recommend revisiting the plan annually. Even a brief 30-minute check-in can be invaluable. These check-ins can also provide an opportunity for family members to raise questions. Have there been any big changes in the family? Is the plan functioning as expected?

By addressing these questions regularly, families can make small, proactive tweaks rather than waiting until a larger, much more pressing issue arises. This approach also helps ensure the plan continues to reflect the family’s current needs, reinforces its importance, and keeps it top of mind. Estate planning reviews should be a routine part of a family’s broader financial planning.

Common Pitfalls in Family Estate Planning

Even with the best intentions, families often encounter avoidable pitfalls in the estate planning and preparation process.

One of the most common pitfalls is when families wait too long to involve their estate planning advisors. For example, approaching your estate planning advisor months before a major financial event, such as the sale of a business. In many cases, this is simply too late. Once a letter of intent has been signed, the valuation of the business is effectively locked in. At that point, critical planning opportunities, such as applying valuation discounts or transferring assets in a tax-efficient manner, are no longer available.

A lack of early engagement can result in missed opportunities to minimize estate and income taxes. In some cases, families are left with no choice but to pay the full tax burden and attempt to manage the consequences afterward.

It is important for everyone in the family to understand why estate planning should be treated as an integral part of their overall financial planning. By keeping advisors informed of major life and financial developments (e.g., family transitions), families can receive timely, strategic guidance that preserves wealth and supports long-term goals.

The bottom line on family estate planning

Family estate planning is deeply personal, and while some people may feel confident navigating it on their own, the value of working with experienced professionals cannot be overstated. Advisors bring objectivity, technical knowhow, and foresight. The greatest risk in doing it alone is not knowing what you do not know.

While it is possible to draft basic documents independently, important elements may end up being overlooked, and while they may not cause problems for decades, when they do, the consequences can be significant. For example, improperly filing a gift tax return for a generation-skipping trust could trigger costly taxes years later, long after the opportunity to correct the mistake has passed.

Advisors also help families make thoughtful decisions about key roles in their estate plan, such as choosing an executor or trustee. Many people struggle with these choices, unsure of what qualities to look for or what responsibilities these roles entail. Without guidance, a family member may appoint someone based on personal trust rather than practical capability, potentially leading to complications during emotionally charged times.

Beyond technical knowledge, advisors help separate emotion from decision-making. Families often feel inclined to involve loved ones based on their personal relationships, but professionals help assess whether those members are equipped to handle complex responsibilities. Are they organized? Can they remain calm under pressure? These are the kinds of questions that experienced advisors are trained to ask.

Aprio’s dedicated advisors can help turn estate planning into an integral part of your family’s overall financial strategy. We guide clients from foundational planning to legacy building, while adapting to life’s changes along the way. Schedule a consultation today.

Related Resources:

• Private Client Services Page
• Unlocking Secrets of the Sunsetting Estate Tax Provision
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