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Spousal Lifetime Access Trusts

A Spousal Lifetime Access Trust (SLAT) is similar to a bypass trust, providing somewhat limited access to income and/or principal for the needs of a surviving spouse. The difference is that a SLAT is funded via gift while the donor is still alive, whereas a bypass trust is funded by bequest when someone passes away.

A SLAT is often used by a married couple who desires to make lifetime gifts to descendants but are hesitant to permanently give away a large portion of their estate and their ability to maintain their current lifestyle.  With a SLAT, one spouse (donor-spouse) makes a gift to an irrevocable trust using the donor-spouse’s gift tax exemption.  More on an irrevocable trust, including its benefits, here. The SLAT then names the non-donor spouse (beneficiary-spouse) as a current beneficiary, allowing the trustee to make distribution of trust funds to the beneficiary-spouse during his or her life.

Potential Benefits of a SLAT

The use of a SLAT offers a number of benefits, including:

  • The donor-spouse can use his or her gift and generation-skipping transfer (GST) tax exemption and the beneficiary-spouse continues to have access to the funds during life.
  • The beneficiary-spouse and/or descendant(s) can serve as trustee, per certain limitations.1429250549_18-128
  • Descendants can be named as current and/or remainder beneficiaries, allowing the SLAT to continue for future generations.
  • Protects assets from the beneficiaries’ creditors.

Planning Considerations

To achieve the potential advantages offered by a SLAT, ask yourself the following questions:

  • How will the SLAT be funded?
  • Will the SLAT acquire life insurance on the donor spouse?
  • Who will serve as trustee?
  • Who will have access to the SLAT funds?
  • What happens in the case of divorce or death?

This list of questions is not exhaustive. Discuss your options with an experienced estate planning attorney.

To determine what type of estate plan best fits your needs and the needs of your family, contact the knowledgeable trusts and estate lawyers at Hart, Watters & Carter today.