Spousal Lifetime Access Trust (SLAT) • Learn with Valur
Estate planning can be a daunting task, especially when it comes to protecting your assets from estate taxes. One way to ensure that your assets are distributed in a tax-efficient trust manner while taking care of your spouse is through a Spousal Lifetime Access Trust (SLAT). In this article, we will explore what is a slat, its tax benefits, and how it can be a useful tool for married couples worried about gift and estate taxes.
What is a SLAT?
A Spousal Lifetime Access Trust (SLAT) is a type of irrevocable trust that allows married couples to transfer assets out of their estate while providing a financial benefit to their spouse. The spouse can access the assets in the trust during their lifetime, and upon their death, the remaining assets are distributed to the beneficiaries named in the trust.
One of the primary benefits of a SLAT is that it allows the transfer of assets out of your ‘estate’ so that the transferred assets and their future appreciation will not be subject to gift or estate taxes while the assets remain accessible to your spouse. This can be especially useful for couples who have a significant amount of assets and are concerned about the potential tax burden on their estate.
Tax Benefits of a SLAT
A SLAT allows the spouse to transfer up to their available lifetime gift exemption amount without a gift tax to the trust. Critically, the value of the assets in the SLAT, including the future appreciation on the assets gifted to the trust, are able to avoid the federal estate tax when the original creator of the trust passes away and when these assets are passed on to future generations.
The SLAT provides a way for married couples to transfer assets to their heirs while minimizing the impact of estate taxes. By placing assets into a trust, couples can potentially save thousands or even millions of dollars in estate taxes, depending on the size of their estate.
How Does a SLAT Work?
To create a SLAT, a married couple would typically transfer assets into the trust, and the trust would then be managed by a trustee. The spouse who creates the trust can name their spouse as a beneficiary of the trust, which would allow them to access the assets in the trust during their lifetime.
The trustee would be responsible for managing the trust and distributing assets according to the terms of the trust. For example, the trust might require that a certain amount of income be distributed to the spouse each year, or it might provide for the distribution of assets to other beneficiaries upon the death of the spouse.
One of the benefits of a SLAT is that it can be set up to be tax-neutral, meaning that the transfer of assets into the trust does not trigger any gift taxes. The trust can also be structured to provide a tax-efficient way to pay for the surviving spouse’s living expenses or to provide for the care of children or grandchildren.
