Spousal Lifetime Access Trust (SLAT)

Example of someone who would benefit from a Spousal Lifetime Access Trust (SLAT)

An example of someone who would benefit from a Spousal Lifetime Access Trust (SLAT) is a married individual who wants to provide financial security for their spouse while also reducing their taxable estate.

Here's a specific scenario:

Let's consider a couple, Sarah and David, who have significant assets and are concerned about estate taxes and protecting their wealth for future generations. They want to ensure financial security for each other while minimizing their estate tax liability. In this case, they decide to establish Spousal Lifetime Access Trusts (SLATs).

Sarah establishes a SLAT for David, while David establishes a SLAT for Sarah. Each spouse transfers assets, such as cash, securities, or real estate, into their respective SLAT, naming their spouse as the primary beneficiary. They also appoint an independent trustee to manage the trust.

By creating SLATs, Sarah and David can achieve several benefits.

First, the assets transferred into the trusts are removed from their taxable estates, potentially reducing future estate tax liability. This is because once the assets are placed in the trust, they are no longer considered part of the spouses' individual estates for tax purposes.

Second, the trust allows Sarah and David to provide financial security for each other during their lifetimes. The spouse who is the primary beneficiary of the trust (i.e., the non-grantor spouse) can access income or distributions from the trust for their support and well-being. This ensures that even if one spouse were to face financial challenges or the need for additional resources, they have access to the trust assets.

Third, any appreciation on the assets held within the SLATs is also removed from the couple's taxable estates. This can result in substantial estate tax savings, especially if the assets experience significant growth over time.

Lastly, SLATs can benefit future generations. Upon the death of the second spouse, any remaining assets in the trust can pass to their chosen beneficiaries, such as children or grandchildren, without being subject to estate taxes.

In summary, Sarah and David, a married couple seeking to provide financial security for each other, minimize estate taxes, and preserve wealth for future generations, would benefit from establishing Spousal Lifetime Access Trusts (SLATs).