What is a Spousal Lifetime Access Trust (SLAT) and do we need one?

A wide range of trusts are available to use as part of a comprehensive estate plan, but you might not be sure which one is right for you between all the confusing acronyms and complicated legal terms. Finding the correct choice is important, as the worst possible outcome is to die without an estate plan at all. For married couples with significant assets, a Spousal Lifetime Access Trust (SLAT) may be the way to go.

Benefits of a SLAT 

To create a SLAT, you as the donor place assets you own into an irrevocable trust while you are still alive. Those assets aren’t available to you any longer but will benefit your spouse. The key difference to a SLAT is that your spouse receives regular disbursements from the trust, even while you are alive. For wealthy professionals in occupations with high legal liability, like physicians, a SLAT can keep your spouse protected even if you lose significant assets in a lawsuit.

A secondary benefit then kicks in after your eventual death. Anything in the SLAT avoids the estate tax, and those assets are protected from your creditors. The same holds true once the beneficiary spouse passes away, as the remaining assets are then available for your children and avoid your spouse’s creditors.

Since it is meant to pay out regular benefits to a spouse and then go to descendants down the line, this type of trust works well for assets that will gain in value over time, like a business that is performing well. 

There are some potential drawbacks that should be discussed with an attorney, however. For instance, joint assets placed in a SLAT are still vulnerable to the estate tax, so assets must be put into one spouse’s name entirely first. The SLAT may also cause headaches if your beneficiary spouse passes away before you since you can’t take assets out of the trust for yourself. Other scenarios also exist where this may not be the best trust type for your financial and family conditions. 

Don’t Put Off Estate Planning Until It’s Too Late

We want to guide you through the process of deciding on the best combination of estate planning and asset protection strategies. Contact us to discuss your unique family situation and find out if we can help tailor a plan to your needs.