Wills, Trusts & Estates: Plain and Simple – “SLATS” – Spousal Lifetime Access Trusts: A Way to Have Your Cake and Eat It, Too?

December 15, 2020

You may have heard of Spousal Lifetime Access Trusts (“SLATS”) lately, especially if you have been thinking about using your federal estate and gift tax exemption before it goes down, whether sooner or later. In the estate planning world, SLATS may actually be a way to “have your cake and eat it, too!”

Usually, when you create a trust for your descendants, you give up all interest in the assets you give to the trust. With a SLAT, however, you can preserve access to the trust assets because your spouse is a beneficiary of the SLAT, too. As long as the spouses remain living and married, both spouses, practically, have the use of the assets of the SLAT.

A SLAT is similar to a trust you would otherwise create for your descendants, except your spouse is also a permissible beneficiary, along with your descendants. The spouse creating the SLAT can gift up to his or her full unused federal exemption amount ($11.58 million for each spouse in 2020) without incurring any gift tax, and the assets in the SLAT will not be included in either spouse’s estate for estate tax purposes at death. Both spouses can create a SLAT, thereby using their combined exemptions to shelter up to $23.16 million in assets from gift and estate taxes, even if the exemptions are later significantly reduced.

There is an important caveat when creating SLATS, if both spouses plan to create one.  In order to avoid the “reciprocal trust doctrine,” which, basically, “undoes” the trusts and puts the assets back in the grantor spouse’s estate for estate tax purposes, it is very important that the SLATS are drafted carefully with varying provisions in each.

If you would like to know more about SLATS, feel free to contact me, or contact your estate planning lawyer.

Reprinted with permission from Lloyd Harbor Life, December 2020. 

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  • Related Practice Areas: Trusts & Estates
  • Publications: Lloyd Harbor Life