Estate and tax planning is a forward-thinking effort that goes well beyond year-end considerations. For couples with high net worth, a Spousal Lifetime Access Trust, or SLAT, can help preserve those assets while reducing related federal tax burden. Consider establishing a SLAT trust now as the current eligible asset value is high, but it is expected to decrease significantly by the end of 2025.
What Is a SLAT Trust?
A SLAT trust is established and funded by one spouse to benefit the other spouse. The donor spouse gives up access and any beneficial interest to the assets transferred into the trust but benefits by taking advantage of the gift tax exemption. The beneficiary spouse retains access to and control of the assets. Other family members such as children or grandchildren can also be included as beneficiaries.
Creating the trust reduces the donor’s estate by the amount transferred into the trust. The trust is not considered part of the beneficiary spouse’s estate, although they may receive distributions from it.
Why Is It Time-Sensitive?
When you make a gift or bequest to your spouse, it is eligible for a 100% tax deduction, so both spouses benefit. As of now, you can give up to $12,920,000 during your lifetime or at death without triggering federal estate and gift taxes. As of January 1, 2026, however, that threshold will drop by about half, as adjusted for inflation, with negative tax implications for both the donor and beneficiary spouse.
Benefits of a SLAT Trust
For couples with substantial net worth, the current elevation in estate and gift tax exemption enables the preservation of more property and/or other assets, resulting in significant tax savings.
Trust asset earnings are excluded from federal gift and estate tax calculations, effectively increasing overall estate value long term. The donor spouse, not the trust itself, pays income tax on any earnings, which further reduces their estate value. They do not have to file a separate tax return for the SLAT.
Potential Downsides of a SLAT Trust
SLAT trusts are irrevocable and the donor may not serve as trustee. So, in the event of a divorce or death of the beneficiary spouse, the donor will no longer have any direct or indirect access to the trust’s assets.
Under the reciprocal trust doctrine, couples may not create two SLAT trusts (one to benefit each spouse) if they are too similar. However, it may be possible to have two SLATs if the key details differ. These complexities make it essential to work closely with your tax advisor on all aspects of estate planning.
Don’t Wait to Learn More
Are you doing everything you can to maximize your estate? For married couples who want to reduce their federal tax burden and protect assets for the near term as well as future generations, a SLAT trust can be a powerful estate planning tool. If you don’t already have a SLAT in place, now is the time to consider establishing one so you, your spouse, and other family members can fully enjoy the benefits.
