Protect assets, retain access with a Spousal Lifetime Access Trust

A Spousal Lifetime Access Trust (SLAT) is an estate planning tool that can be used to lock in the current estate tax exemption while still allowing a certain degree of access to trust assets.

SLAT basics
A SLAT is an irrevocable trust created by one spouse for the benefit of the other. The gift removes assets from your estate but allows your spouse to access the trust. It provides you with indirect access to the funds while protecting assets from both creditors and estate taxes.

Here are the key benefits of creating a SLAT:

  • Avoiding probate: Assets in a SLAT avoid probate. That reduces costs and ensures funds are available immediately after death.
  • Avoiding estate tax: The Tax Cuts and Jobs Act roughly doubled the exemption value for the estate tax to nearly $11.2 million. This change will sunset after 2025, but it could be repealed by a future administration before then. For high-net-worth families, it may make sense to shift assets out of their taxable estates now, before the rules change.
  • Tax-free growth: SLATs are taxed as a grantor trust, meaning the donor spouse is responsible for income tax on trust earnings. That way, the trust grows tax-free, increasing the asset protection benefits.

The trust can be structured in a variety of ways. One option is to allow only the beneficiary spouse to access funds during his or her lifetime with descendants receiving benefit after the beneficiary’s death. However, SLATS can also be structured to allow distributions to a beneficiary spouse and children at the same time.

Think carefully before creating a SLAT. If your spouse dies before you do, or if you and your spouse divorce, you will no longer have indirect access to trust assets.

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