Estate Planning With Spousal Lifetime Access Trusts (“SLATs”)

Spousal lifetime access trusts, also known as “SLATs”, have become increasingly popular in estate planning in recent years. A spousal lifetime access trust is an irrevocable trust established between a couple, where one spouse places assets into trust for the benefit of the other spouse. The couple designates a trustee to manage the trust assets and usually the second spouse is a primary beneficiary. This can help couples establish a secure financial legacy while avoiding the hefty estate taxes that often come with passing assets between spouses after death.

While it might seem odd to create a trust with assets to benefit a spouse, SLATs can be a great way to ensure that both spouses get the most out of their estate. The funds placed in the trust can be used to provide the surviving spouse with income, pay for long-term care and other expenses, or used as an emergency fund. Additionally, SLATs can be used to fund charitable goals, such as setting up a charitable foundation or endowment.

However, as with all estate planning, it is important to consider the tax implications of establishing a spousal lifetime access trust. Generally, assets placed in a SLAT are subject to gift tax and, if the primary beneficiary is not the spouse, estate taxes could apply when the surviving spouse passes away. The trust beneficiaries are also limited to the trusts’ settlor (person who created the trust) and spouse, meaning individuals other than the couple would not be eligible for distributions from the trust.

Another important factor to consider is that SLATs require careful maintenance and monitoring to ensure that the trust remains valid. The couple must make sure that none of the trust assets are used as marital resources and that all distributions are kept separate from the couple’s joint possessions and assets.

Spousal lifetime access trusts can be an effective estate planning option for couples intending to pass their assets on to each other. However, couples should seek professional advice to make sure that their SLAT is properly established and structured in order to maximize its intended benefits. With careful planning and attentive maintenance, a SLAT can be a great tool to help couples manage their estate and provide financial security to both spouses.


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