Spousal Lifetime Access Trusts (SLATs) help couples preserve wealth and maximize estate tax exemptions. These advanced estate planning tools reduce tax burdens by transferring assets strategically, providing financial security in the process.
Understanding SLATs and their benefits
A SLAT is an irrevocable trust established by one spouse for the benefit of the other. The primary purpose of this planning device is to take advantage of exemptions for gift and estate taxes. The grantor of the trust will no longer have access to the assets once they have been placed in the SLAT. The beneficiary spouse can access distributions during their lifetime, offering financial flexibility while protecting the trust’s assets for future generations. These trusts are irrevocable and cannot be changed once established.
Leveraging estate tax exemptions
The current federal estate tax exemption, set at $13.99 million per individual in 2025, may decrease in 2026 pending the expiration of the Tax Cuts and Jobs Act of 2017. Transferring assets into a SLAT effectively lowers the size of the estate. Couples who create SLATs now lock in the higher exemption by transferring assets and lowering future tax liabilities.
Since a SLAT qualifies as a grantor trust the income taxes of the trust are the responsibility of the grantor. By remaining the payor of those tax liabilities, the grantor can continue to reduce their taxable estate. Additionally, the beneficiaries of the SLAT aren’t responsible for these tax costs. Furthermore, the growth of the asset will not cause growth in the value of the grantor’s estate.
Maximizing wealth while avoiding pitfalls
Effective planning is crucial to avoid common SLAT pitfalls. The “reciprocal trust doctrine” can nullify benefits if two SLATs share overly similar terms. Couples should draft trusts with distinct terms and beneficiaries. Transferring assets into a SLAT permanently removes them from the grantor’s direct control, so choosing assets that are not immediately needed is essential.
SLATs reduce estate taxes and preserve wealth for future generations. By structuring SLATs thoughtfully, families adapt to tax law changes and achieve long-term financial goals. These trusts highlight the importance of strategic planning for wealth management and protection.