A SLAT trust, short for spousal lifetime access trust, is an estate planning tool that married couples sometimes use to move assets out of their taxable estates while keeping indirect access to those assets through a spouse. It has drawn more attention as families think about how future changes to estate tax law could affect their plans.
But a SLAT is not right for everyone. It is irrevocable, it involves real tradeoffs, and it requires careful drafting by an estate planning attorney. This guide explains how a SLAT trust works, why families consider one, and the risks to understand before moving forward.
What Is a SLAT Trust?
A spousal lifetime access trust is an irrevocable trust that one spouse (the grantor) creates and funds for the benefit of the other spouse. Children or other descendants are often named as additional or remainder beneficiaries.
Because the grantor makes a completed gift to the trust, the assets and their future growth are generally removed from the grantor's taxable estate. At the same time, the beneficiary spouse may receive distributions from the trust under the terms the trust sets. That is where the "lifetime access" in the name comes from.
Key roles in a SLAT
Grantor: The spouse who creates and funds the trust.
Beneficiary spouse: The spouse who may receive distributions during their lifetime.
Trustee: The person or institution responsible for managing the trust and following its terms.
Remainder beneficiaries: Often children or grandchildren, who may receive what is left later.
How Does a SLAT Work?
Here is a simplified look at how a SLAT is typically set up and used.
Drafting: An estate planning attorney drafts the trust document based on the family's goals.
Funding: The grantor transfers assets, such as cash or investments, into the trust using their own separate property.
Gift reporting: The transfer is generally reported on a federal gift tax return and uses part of the grantor's lifetime gift and estate tax exemption.
Management: The trustee invests and manages trust assets.
Distributions: The trustee may make distributions to the beneficiary spouse according to the trust's terms.
How SLATs are often taxed
Many SLATs are designed as "grantor trusts" for income tax purposes. That generally means the grantor pays income tax on trust earnings, which can allow trust assets to grow without being reduced by those taxes. Tax treatment depends on how the trust is drafted, so review the details with a tax professional.
Why Do Families Consider a SLAT Trust?
People exploring SLAT estate planning often have a few common goals.
Using the lifetime exemption: The federal gift and estate tax exemption is set by law and can change. Some families consider making gifts while a given exemption amount is available.
Removing future growth: Appreciation on assets inside the trust is generally outside the grantor's taxable estate.
Keeping flexibility: Unlike some gifts directly to children, a SLAT may allow the beneficiary spouse to receive distributions if needed.
Planning for the next generation: Remainder beneficiaries can benefit from assets that were moved out of the estate years earlier.
Exemption amounts and tax rules can change, so check current IRS guidance and work with your attorney and tax professional.
What Are the Risks of a SLAT?
A spousal lifetime access trust involves real tradeoffs. These are some of the most searched concerns.
Divorce
If the couple divorces, the former spouse may still be a beneficiary under the trust terms. The grantor generally cannot take the assets back. Some trusts include provisions to address this, which is a key drafting conversation.
Death of the beneficiary spouse
The grantor's indirect access depends on the beneficiary spouse. If that spouse passes away first, the grantor may lose that access to trust assets.
Irrevocability
A SLAT is generally permanent. Assets transferred to the trust are no longer the grantor's to control directly, so families need to be sure they have enough resources outside the trust.
Two SLATs for each spouse
Some couples consider creating a SLAT for each other. If the trusts are too similar, the IRS may challenge them under what is known as the reciprocal trust doctrine. Careful drafting and real differences between the trusts are important.
SLAT vs Other Estate Planning Trusts
A SLAT is one of several trust options. People often compare it to:
Revocable living trusts: Help with probate and management, but assets generally stay in the taxable estate.
Irrevocable gift trusts for children: Remove assets from the estate but typically do not give a spouse access.
Other irrevocable trusts: Designed for specific goals, such as charitable giving or life insurance.
To review the basics, see our earlier article on understanding spousal lifetime access trusts (SLATs).
How a SLAT Fits Into a Broader Plan
A SLAT trust works best when it is considered alongside your full financial picture: income needs, retirement plans, investment strategy, and goals for the next generation. At VestGen, Estate Planning means working with estate planning attorneys on wills, trusts, and wealth transfer, alongside Comprehensive Planning, Investment Management, and Tax Optimization. Learn more on our Services page.
Who VestGen Serves and Where
Every financial journey is distinct, and so is our approach. VestGen Wealth Partners offers bespoke wealth management solutions crafted to align with your individual goals and aspirations. We go beyond traditional financial planning to deliver solutions that are as unique as our clients' ambitions.
VestGen serves clients across the nation through many office locations, including Chicago, Glen Ellyn, Schaumburg, Naperville, Oak Brook, South Barrington, St. Charles, and Downers Grove in Illinois, Kirkwood and Kansas City in Missouri, and locations in Texas, New Jersey, Florida, and North Carolina. You can find an advisor near you.
Ready to Start Your Journey?
If you are wondering whether a SLAT trust could fit into your estate plan, contact VestGen Wealth Partners to schedule a consultation with one of our advisors. Together, we can chart a course toward your financial future.
Frequently Asked Questions
What is a SLAT trust in simple terms?
A SLAT is an irrevocable trust one spouse creates for the benefit of the other spouse. It is designed to move assets out of the grantor's taxable estate while allowing the beneficiary spouse to receive distributions.
Can the grantor spouse benefit from a SLAT?
Not directly. The grantor may benefit indirectly through distributions made to the beneficiary spouse, as long as the marriage continues and the spouse is living.
What happens to a SLAT in a divorce?
The former spouse may remain a beneficiary depending on the trust's terms, and the grantor generally cannot reclaim the assets. Discuss divorce provisions with your attorney when drafting.
Who pays taxes on a SLAT?
Many SLATs are structured as grantor trusts, so the grantor generally pays income tax on trust earnings. The exact treatment depends on the trust document.
Can both spouses create a SLAT for each other?
Yes, but the trusts should be meaningfully different. Trusts that are too similar may be challenged under the reciprocal trust doctrine.
Can a SLAT be undone?
A SLAT is generally irrevocable. Some trusts include limited flexibility, but you should plan as if the transfer is permanent.
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