High-net-worth individuals often hesitate to implement estate planning strategies due to concerns about relinquishing control over significant assets. One effective strategy that helps ease these concerns is the Spousal Lifetime Access Trust (SLAT). A SLAT is an estate planning tool that allows the donor spouse to remove assets from their taxable estate while maintaining a certain level of indirect access to such assets through the SLAT’s beneficiary spouse.
Leveraging the Lifetime Gift Tax Exclusion
In addition to offering flexibility and maintaining some level of control, SLATs provide a pathway for high-net-worth individuals looking to utilize their lifetime gift tax exclusion amount, which is set to increase in 2026 under the One Big Beautiful Bill Act, commonly referred to as the OBBBA or OB3. Effective January 1, 2026, the lifetime exclusion will increase to $15 million per individual. The increased exclusion provides married couples with an opportunity to expand their lifetime gifting while also leveraging the benefits of a SLAT.
How a SLAT Is Structured
To form a SLAT, a grantor funds an irrevocable trust where the grantor’s spouse will be a discretionary beneficiary of income and principal from which the grantor indirectly shares. Children and other descendants are permitted remainder beneficiaries. Therefore, if the donor allocates the Generation-Skipping Transfer (GST) tax exemption when funding the SLAT, the assets can pass to future generations without estate or gift tax, making a SLAT a powerful tool for building generational wealth.
Tax Advantages of SLATs
SLATs are also advantageous because, if successful, they are effective in avoiding taxation in both the donor’s and the beneficiary’s estates. Not only does gifting rapidly appreciating assets to a SLAT reduce potential estate tax liability for the donor, but it also excludes any post-gift appreciation from their taxable estate. The beneficiary spouse also excludes the SLAT’s assets and appreciation if they follow the proper guidelines.
Risks and Considerations for SLATs
SLATs are not without risks. Two potential pitfalls include the death of the beneficiary spouse and divorce. To maintain the grantor spouse’s access if the beneficiary spouse predeceases the grantor, the SLAT could contain provisions that create a new trust upon the beneficiary spouse’s death. In the case of divorce, unless the trust includes a “death on divorce” clause, the beneficiary spouse might still be entitled to distributions after the divorce. Couples must also be aware of the reciprocal trust doctrine, which may be applicable if both spouses create similar SLATs, potentially causing the IRS to treat the trusts as if each spouse retained control, thereby reversing the estate tax benefits.
If structured properly, SLATs are a highly effective component of a comprehensive estate planning strategy. We encourage you to reach out to your Withum tax advisor with any questions or to explore whether a SLAT is right for your financial goals.
Authors: Jordan Furman | [email protected] and Anthony Pagano, CPA | [email protected]
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