Spousal Lifetime Access Trusts (SLATs) and Their Tax Implications
Spousal Lifetime Access Trusts (SLATs) and Their Tax Implications
High-net-worth couples are increasingly turning to Spousal Lifetime Access Trusts (SLATs) as a way to reduce estate taxes while retaining indirect access to trust assets.
With lifetime estate and gift tax exemptions currently at historic highs—but potentially declining—SLATs offer a strategic way to lock in today’s benefits.
This guide explores how SLATs work, their tax impact, and best practices for avoiding IRS pitfalls.
📌 Table of Contents
- What Is a SLAT?
- Tax Benefits of SLATs
- How to Structure a SLAT Correctly
- IRS Scrutiny and SLAT Mistakes to Avoid
- When SLATs Make the Most Sense
What Is a SLAT?
A Spousal Lifetime Access Trust (SLAT) is an irrevocable trust created by one spouse for the benefit of the other spouse—while removing assets from the grantor’s taxable estate.
✔️ The donor uses their lifetime gift tax exemption to fund the trust
✔️ The beneficiary spouse may receive income or principal distributions
✔️ SLATs provide estate tax savings while preserving family access to wealth
Tax Benefits of SLATs
✔️ Uses current gift and estate tax exemption (currently $13.61M per person in 2024)
✔️ Removes appreciation of trust assets from both estates
✔️ Asset protection from future creditors and estate taxes
✔️ May be structured to benefit children or future generations as well
How to Structure a SLAT Properly
✔️ Create an irrevocable trust with independent trustee
✔️ Fund the trust using separate property—not jointly held assets
✔️ Clearly define distribution standards for the beneficiary spouse
✔️ Avoid reciprocal trust doctrine (two spouses creating identical SLATs for each other)
Common SLAT Pitfalls and IRS Red Flags
✘ Reciprocal trusts that mirror each other may be collapsed by the IRS
✘ Lack of independence in trust administration (e.g., beneficiary as trustee)
✘ Commingling trust and personal assets post-transfer
✘ Using jointly-owned funds to fund the SLAT may cause inclusion in both estates
When SLATs Make Strategic Sense
✔️ High-net-worth couples who have not yet used their lifetime exemption
✔️ Families concerned about future reductions in estate tax exemption levels
✔️ Married individuals with significant separate property to gift
✔️ Estate planners seeking to pair SLATs with life insurance or dynasty trusts
🔗 Advanced Trust & Estate Strategy Resources
— Align SLAT strategies with international tax planning.
— Use insurance structures inside SLATs to grow assets tax-deferred.
— Add digital assets to SLATs securely.
— Fund policies inside SLATs without liquidating assets.
— Maximize tax benefits across generations.
Keywords: SLAT trust, estate tax planning, spousal irrevocable trust, gift tax exemption, high-net-worth estate strategy