Spousal Lifetime Access Trust (SLAT) – A Way to Have Your Cake and Eat It Too!
What is a SLAT?
A SLAT is an estate planning tool available to a married couple that allows a spouse the ability to remove assets from their combined estates by making a sizeable irrevocable gift to a trust today for the benefit of the other spouse, children, and/or future generations. If properly structured, the gift will not be subject to estate tax in either spouse’s estate (using the donor spouse’s Unified Credit) but will still allow the couple to maintain access (limited) to both income and principal during the lifetime of the donee spouse.
Why is it Important and Timely?
The current Unified Credit is $11,700,000. This means that currently a person may transfer up to $11,700,000 to her/his beneficiaries during their lifetime as a gift or upon death as a bequest without any estate tax. The amount of the Unified Credit is scheduled to be halved after the 2017 Tax Cuts and Jobs Act sunsets on December 31, 2026. Also, to add a greater sense of urgency, there are currently several tax proposals swirling about that may reduce it by more than half immediately and may increase the top estate tax bracket as well.
Considerations & Benefits of a SLAT
- Lock in today’s Unified Credit amount
- Estate freeze on assets transferred to the trust
- The spouse beneficiary has access to trust income
- The spouse may have access to principal (limited)
- Assets may be used for the benefit of specified other family members during the spouse’s life if you wish (limited income & principal)
- Life insurance can be purchased on the life of the spouse beneficiary
- Estate and income tax-free death benefit
- Life insurance cash values can be accessed for the spouse beneficiary’s lifetime needs
- Can fund up to the “Unified Credit” amount
- Can be a multi-generational trust
- Can be designed as an Asset Protection Trust
Managing Director – Financial Planning