Like the retail industry and memes, estate planning and trust techniques tend to trend in cycles depending on existing federal and state tax laws, fluctuations in interest rates and investments, and a touch of crystal-ball predictions about future changes to both given the political climate of the day. Estate planning acronyms tend to ride these trends and SLAT is the acronym of the moment. In short, the SLAT allows a client concerned about estate taxes to “gift” up to the maximum allowable amount into an irrevocable trust while still maintaining access to the benefit of the gifted assets through one’s spouse.
SLAT stands for Spousal Life Access Trust. A SLAT is a shorthand reference for trusts for spouses created and funded during one’s lifetime (as opposed to funded at the death of the first spouse). Although a SLAT is an irrevocable trust, the benefit of a properly drafted SLAT is that the funds are out of both spouses’ estates—thus avoiding estate tax on assets in the SLAT—but allows control and access to the funds held by the SLAT trust until the death of the surviving spouse (the second spouse to die). The beneficiary spouse can still access distributions of income or principal from the transferred assets if needed and if permitted by the SLAT. The SLAT can also allow the trustee to make loans of trust assets to the grantor spouse, to be paid back by the estate at death.
