Have you ever heard of a SLAT? A Spousal Lifetime Access Trust, more commonly referred to as a “SLAT,” is an estate planning tool that allows you to remove up to $11.6 million from your estate and place it in an irrevocable trust for your spouse, which your spouse can then use and access during his or her lifetime. The primary benefit of a SLAT may be that it allows your spouse to use distributions from the irrevocable trust while you are both living while simultaneously avoiding the estate tax and isolating those assets from creditors.
In order to obtain the estate planning and asset protection benefits of a SLAT, there are a few precautions you should consider taking. First, you may want to be sure that there is no express or implied agreement that the party gifting the assets in the trust will get those assets back. In other words, it should be clear that the assets in the trust will not be returned to the grantor or the trust will not be viewed as “irrevocable.” Second, the SLAT should not allow for the funds in the trust to be used to pay the creditors of the grantor. Again, if the trust allows for such payments, it may not qualify as a SLAT and there may be resulting tax consequences. Finally, although the beneficiary of the SLAT cannot agree to return the funds to the grantor, the beneficiary can distribute the funds to their children, thereby allowing the assets to remain in the family if the beneficiary spouse should pass away while the trust remains funded.
To find out if you and your family would benefit from a SLAT, contact our office today. We can review your finances and your estate planning goals to help make recommendations regarding the best estate planning vehicles, including SLATs, to preserve your assets for your family and minimize any adverse tax consequences.