Estate & Legacy

Spousal Lifetime Access Trust (SLAT)

A Spousal Lifetime Access Trust allows married couples to remove assets from their taxable estate while retaining indirect access through the beneficiary spouse, an increasingly popular strategy to lock in the current high estate tax exemption.

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What Is a SLAT?

An irrevocable trust created by one spouse for the benefit of the other spouse (and potentially children)
Assets transferred to the SLAT are removed from the grantor's taxable estate
The beneficiary spouse can receive distributions from the trust, providing indirect access to the assets
Uses the grantor's lifetime gift/estate tax exemption, locking in the current high exemption amount

Why SLATs Are Popular Now

The current estate tax exemption is historically high (check IRS.gov for current year amounts)
Assets already in a SLAT are permanently protected even if exemption levels change in the future
The IRS has confirmed that gifts made under the current high exemption won't be 'clawed back' if limits decrease
Couples can potentially remove millions from their combined estates while retaining practical access

How Indirect Access Works

The beneficiary spouse can request distributions from the trustee for health, education, maintenance, and support
Distributions provide the couple access to funds without the assets being included in either estate
An independent trustee provides the strongest creditor protection and tax position
The trust can also benefit children and grandchildren, creating a multi-generational wealth transfer vehicle

Reciprocal Trust Doctrine Risk

If both spouses create identical SLATs for each other, the IRS may invoke the reciprocal trust doctrine
This doctrine can 'uncross' the trusts, treating each spouse as the grantor of their own trust, defeating the purpose
Mitigation: make the trusts materially different in terms, timing, funding amounts, or beneficiary provisions
Common approach: fund the trusts with different amounts, different assets, or different distribution standards

Risks and Considerations

Divorce risk: if the marriage ends, the grantor spouse loses access to the assets in the other spouse's SLAT
Death of beneficiary spouse: the grantor loses indirect access (trust can continue for children)
Irrevocable: once funded, the transfer generally cannot be undone, careful sizing is critical
Gift tax implications: the transfer uses lifetime exemption and should be coordinated with overall estate plan

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What Is a SLAT?

An irrevocable trust created by one spouse for the benefit of the other spouse (and potentially children)
Assets transferred to the SLAT are removed from the grantor's taxable estate
The beneficiary spouse can receive distributions from the trust, providing indirect access to the assets
Uses the grantor's lifetime gift/estate tax exemption, locking in the current high exemption amount

Why SLATs Are Popular Now

The current estate tax exemption is historically high (check IRS.gov for current year amounts)
Assets already in a SLAT are permanently protected even if exemption levels change in the future
The IRS has confirmed that gifts made under the current high exemption won't be 'clawed back' if limits decrease
Couples can potentially remove millions from their combined estates while retaining practical access

How Indirect Access Works

The beneficiary spouse can request distributions from the trustee for health, education, maintenance, and support
Distributions provide the couple access to funds without the assets being included in either estate
An independent trustee provides the strongest creditor protection and tax position
The trust can also benefit children and grandchildren, creating a multi-generational wealth transfer vehicle

Reciprocal Trust Doctrine Risk

If both spouses create identical SLATs for each other, the IRS may invoke the reciprocal trust doctrine
This doctrine can 'uncross' the trusts, treating each spouse as the grantor of their own trust, defeating the purpose
Mitigation: make the trusts materially different in terms, timing, funding amounts, or beneficiary provisions
Common approach: fund the trusts with different amounts, different assets, or different distribution standards

Risks and Considerations

Divorce risk: if the marriage ends, the grantor spouse loses access to the assets in the other spouse's SLAT
Death of beneficiary spouse: the grantor loses indirect access (trust can continue for children)
Irrevocable: once funded, the transfer generally cannot be undone, careful sizing is critical
Gift tax implications: the transfer uses lifetime exemption and should be coordinated with overall estate plan

Key Takeaways

SLATs offer a way to remove assets from your estate while maintaining indirect family access
The historically high exemption makes SLATs an effective vehicle for large wealth transfers
Carefully differentiate spousal SLATs to avoid the reciprocal trust doctrine
Work with an estate planning attorney and financial advisor to determine if a SLAT fits your situation

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The information above is for educational purposes only and does not constitute investment advice, a recommendation, or a solicitation to buy or sell any security. Any historical figures are for illustration only, and past performance does not guarantee future results. Tax laws, regulations, and contribution limits change frequently, the details here may become outdated. Individual circumstances vary. Consult a qualified financial advisor, CPA, or attorney for guidance specific to your situation. Rubric Advisors is registered with the California DFPI; registration does not imply a certain level of skill or training.

Spousal Lifetime Access Trust (SLAT)

What Is a SLAT?

Why SLATs Are Popular Now

How Indirect Access Works

Reciprocal Trust Doctrine Risk

Risks and Considerations

Key Takeaways

What Is a SLAT?

Why SLATs Are Popular Now

How Indirect Access Works

Reciprocal Trust Doctrine Risk

Risks and Considerations

Key Takeaways

Related Topics

Intentionally Defective Grantor Trust (IDGT)

Grantor Retained Annuity Trust (GRAT)

Asset Protection Planning for High Earners

Spousal Lifetime Access Trust (SLAT)

What Is a SLAT?

Why SLATs Are Popular Now

How Indirect Access Works

Reciprocal Trust Doctrine Risk

Risks and Considerations

Key Takeaways

What Is a SLAT?

Why SLATs Are Popular Now

How Indirect Access Works

Reciprocal Trust Doctrine Risk

Risks and Considerations

Key Takeaways

Related Topics

Intentionally Defective Grantor Trust (IDGT)

Grantor Retained Annuity Trust (GRAT)

Asset Protection Planning for High Earners