What is a Spousal Lifetime Access Trust (SLAT)?

By Jamie Rowley and Mariam Hall

A Spousal Lifetime Access Trust (SLAT) is an irrevocable trust created by one spouse for the benefit of the other spouse. The grantor uses their gift tax exemption to make a gift to the SLAT for the benefit of their spouse. Similar to other planning techniques to make completed gifts that are outside of the grantor’s estate, the grantor gives up his or her right to the property transferred into the trust while the beneficiary spouse maintains access to that same property.

The goal of a SLAT is to get assets out of a grantor’s estate and into a trust that can provide financial support for one’s spouse while sheltering those assets and any future growth from estate and gift tax. By creating a trust for one’s spouse, the grantor may continue to benefit from the property through the spouse without concern of creditor claims or estate tax inclusion.

Benefits of a Spousal Lifetime Access Trust

SLATs are used for many reasons, including minimizing estate taxes, avoiding gift taxes, reducing or eliminating capital gains tax, protecting assets from creditors, and taking advantage of grantor income tax rates. Read more here to learn about the benefits of Spousal Lifetime Access Trusts.

Key Considerations When Creating a SLAT

There are several important considerations to keep in mind when setting up a SLAT. For example, who will be the trustee as the grantor should not serve as trustee? Who will the beneficiaries be – Spouse, children, other descendants? Do you want to assign a trust protector and what duties will be assigned to them, such as the power to remove a trustee? How will the trust be funded? Are both spouses using a SLAT? If so, it is very important to avoid reciprocal trust doctrines. Do you need language regarding the possibility of divorce? Learn more here about the key considerations when creating a SLAT.

If you have more questions about a Spousal Lifetime Access Trusts, get in touch with a trust officer at Peak Trust Company today!