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What Is a Spousal Lifetime Access Trust?

Estate planning can be intimidating, particularly when it comes to ensuring the financial security and well-being of your loved ones. Among the various tools available to protect your assets and provide for your family, the Spousal Lifetime Access Trust is a powerful strategy with unique advantages. Here’s what to know about the Spousal Lifetime Access Trust, its benefits, and how it can help.

What to Know About a SLAT

A Spousal Lifetime Access Trust (SLAT) is a type of irrevocable trust that allows one spouse (the grantor) to make a gift to an irrevocable trust for the benefit of the other spouse (the beneficiary). The trust is usually set up so that the beneficiary spouse can access the trust’s assets during their lifetime, while any remaining assets can ultimately pass to the couple’s heirs or beneficiaries.

The Benefits of a SLAT

1. Asset Protection

One of the primary advantages of a SLAT is the protection it offers to the assets placed within the trust. Since the assets are irrevocably transferred to the trust, they are shielded from various creditors and potential legal claims.

2. Lifetime Access

While the grantor spouse relinquishes control over the assets, the beneficiary spouse can access the trust’s income and, in some cases, principal during their lifetime. This access provides financial security to the beneficiary spouse while preserving the assets for future generations.

3. Gift Tax Benefits

Gifts made to a SLAT are subject to gift tax rules. However, they often fall within the annual gift tax exclusion limit, which means they can be made without incurring gift tax. This can be a tax-efficient way to transfer wealth to the beneficiary spouse.

4. Future Estate Tax Benefits

A well-structured SLAT can help reduce the grantor’s taxable estate, potentially resulting in lower estate taxes upon the grantor’s passing. The assets in the trust are typically not included in the grantor’s estate for tax purposes.

Important Considerations

While SLATs offer many advantages, they require careful planning and consideration to ensure they align with your specific financial and family goals. Here are some important considerations:

  • Selecting the Right Trustee – Choosing a trustee who will act in the best interests of the beneficiary spouse is extremely important. This person should be responsible, reliable, and capable of managing trust assets effectively.
  • Funding the Trust – Adequately funding the trust is essential to achieve your goals. The size and composition of the assets transferred to the trust should be carefully determined.
  • Spousal Consistency – SLATs work best when both spouses understand and agree upon objectives and decisions regarding the trust. Communication and transparency are key to ensuring the trust operates as intended.
  • Regular Review – Estate planning is never “complete.” It’s important to review and potentially update your SLAT in response to changes in tax laws, family circumstances, and financial goals.

Biddle Law Can Help 

If you’re interested in exploring how a SLAT could benefit your estate plan, it’s important to consult with a knowledgeable and experienced California estate planning attorney who has experience dealing with such important estate planning tools. 

At Biddle Law, we are here to answer all of your questions and walk you through the entire estate planning process. We care about you and your loved ones and want to help in any way we can. To learn more or to schedule a consultation, contact us today!