SPOUSAL LIFETIME ACCESS TRUST (SLAT)

Why would you need this type of Trust?

A Spousal Lifetime Access Trust (SLAT) can be useful for several reasons.

First, it can help a married couple reduce their taxable estate by transferring assets to the trust. This can be especially helpful if one or both spouses have a large estate that may be subject to estate tax. The transfer will be subject to gift tax (use of the exemption), but the appreciation of assets will no longer be within the taxable estate of either the gifting spouse or the beneficiary spouse.

Second, a SLAT can provide a way to benefit a spouse while also providing creditor protection. The independent trustee can control the distributions and approve them.

Third, a SLAT can provide for future generations, such as children or grandchildren, through generation-skipping transfer tax (GST) allocations.

Lastly, a SLAT can provide flexibility and control for the gifting spouse, allowing them to retain some access and control over the trust assets while still removing them from their taxable estate.

Is it irrevocable or revocable?

The Spousal Lifetime Access Trust is irrevocable, meaning it cannot be changed once it is created. Sometimes, you might allow a Trust Protector (or Trust Advisor) to make modifications.

Is a separate tax identification required?

The Spousal Lifetime Access Trust does not require a separate Tax Identification Number; the creator (Settlor or Grantor) would use their social security number as the identification number. Upon death, a social security number can no longer be used.

Can you be your own Trustee?

No, you cannot serve as a Trustee to ensure the assets are outside of your taxable estate.

Is a gift tax return required?

Yes. A SLAT will require the filing of a gift tax return. Generally, you would also allocate GST to this Trust.

Is this subject to estate tax upon my death?

No, the goal of a SLAT is to remove assets from your taxable estate.

Is there creditor protection?

Yes. There will be creditor protection if you have an independent trustee who controls and can approve distributions.

What assets can be placed in this type of Trust?

Any assets can be placed into a SLAT.

How does it work?

The SLAT will benefit a spouse and perhaps children (and grandchildren), thus using GST. This will allow access by the beneficiary spouse but not the gifting spouse. It is possible to structure the SLAT to terminate a spouse’s access if there is a divorce.