Now may be the time to consider a spousal lifetime access trust (SLAT)

With the upcoming election and potential tax law modifications based on the outcome, high net worth married couples should consider meeting with their advisors to determine what they can do to prepare for potential tax changes. One strategy worth consideration is a spousal lifetime access trust, commonly referred to as a SLAT.

 

A SLAT is a gift from one spouse to an irrevocable trust for the benefit of the other spouse. Unlike other types of credit shelter trusts, a SLAT is funded while both spouses are still living. The beneficiary spouse can receive distributions from the SLAT even though it is designed to be excluded from the beneficiary spouse’s gross estate and not be subject to estate tax when the beneficiary spouse dies.

 

It may be a good time to take advantage of a SLAT because there could be a decrease in the federal gift and estate tax exemption, which is currently at $11.58 million per person or $23.16 million for a married couple. For example, if a President Biden and Democrat-controlled Congress passed tax legislation in 2021 that lowered the exemption to $3.5 million (a number that has been mentioned), this could be made retroactive to the beginning of the year. But if the SLAT was funded in 2020, you will not be adversely affected if the amount is decreased.

 

There are many pros and cons of SLATs to take into consideration. It is best to talk to your estate planning attorney and determine if this is the right option to allow you to take advantage of the favorable estate and gift tax exemption. Just know there is a chance your window may close at the end of this year, so don’t wait much longer.

 

Chris Ponteri, MBA, is a wealth manager with SVA Wealth Management and trust officer with SVA Trust Company.

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