A popular planning strategy for using a married couple’s gift/estate tax exclusion is for one or both of the spouses to create a spousal lifetime access trust (“SLAT”). A SLAT offers significant opportunities to save on estate taxes when the gifted assets appreciate. Key among these is that the grantor has only indirect access to the trust property through his or her spouse. Because one of the greatest utilities of a SLAT hinges on a spouse as a primary beneficiary, divorce has the effect of cutting off a donor spouse’s indirect access to the SLAT. However, with a SLAT, the funds are received through the gift tax exemption. A SLAT is an irrevocable trust created by one spouse (the “grantor”) for the benefit of the other spouse and their children or other heirs. A SLAT works when the estate planning and marital income needs are aligned and coordinated. TRUST & ESTATE PLANNING SLAT: A Key Strategy for Married Couples Making Large Gifts. Some of the most effective estate-planning strategies involve setting up irrevocable trusts. the estate tax. A SLAT might be the right choice for your estate planning needs. This is the eighth installment in a blog series on opportunities for tax planning in the current low-interest rate environment. Read on. Use Exemption Amount Before You Lose It. SLAT's like many estate planning strategies have their drawbacks. Setting up a Spousal Lifetime Access Trust (SLAT) now can help you lock in the current exemption before it is drastically reduced. For a trust to be deemed irrevocable, you’re effectively removing those assets from your taxable estate. Finally, assets in a SLAT do not receive a "step-up" in cost basis at death, so consideration should be given to the basis of assets transferred. In cases of other estate planning tools, such as a bypass trust, the spouse usually has to be deceased in order for the survivor to access the trust. Now may be the time to take advantage of a historically favorable tax environment. Tweet. Proper funding of a Spousal Lifetime Access Trust is imperative for the property transferred to the SLAT to be excludable from the non-grantor spouse’s estate for estate tax purposes. Single Life SLAT. When funded with appropriately selected assets, SLATs offer the opportunity to … By redistributing wealth into a SLAT under the federal gift tax exemption, assets grow free from taxation, including future estate and generation-skipping transfer taxes. and estate tax exemption provides the opportunity for the beneficiary spouse to maintain access to trust assets while engaging in planning to provide the future transfer of assets and potential estate tax mitigation. Most SLATs are set up as Intentionally Defective Grantor Trusts (IDGTs) or trusts where the grantor is the owner of the trust for income tax purposes but has relinquished rights to the trust assets for estate … SLATs are also a way that Crummey letters can be avoided. This is simply a trust that one spouse sets up for the other spouse and their children/grandchildren. This is because the current estate tax exemption amount (i.e., the amount which individuals can gift to others free of gift or estate tax) is currently the highest it has ever been. A SLAT is a type of irrevocable trust set up by one spouse for the benefit of the other, and it can be a valuable estate planning tool for the right client. 11.20.2020 - Bryan Kirk. You can make a gift using your estate and gift tax exemption before it potentially decreases. June 21, 2018 Uncategorized Comments Off on A SLAT Offers Estate Planning Benefits and Acts as a Financial Backup Plan. Divorce would have the effect of cutting off a donor spouse’s indirect access to the SLAT’s assets. A Spousal Lifetime Access Trust (better known as a SLAT trust) is a type of irrevocable trust. Estate Planning Alert: Take Advantage of 2020 Planning Opportunities Now. Estate planning before the 2020 election may be critical to pursue. At Sedita, Campisano and Campisano in New Jersey, estate planning attorney Frank Campisano is ready to assist you with all your estate planning needs – whether you need to make a business succession plan, Last Will and Testament, Power of Attorney, a Living trust, SLAT trust or to minimize inheritance tax on your estate. A variety of trusts — from SLATs to BDITs, GRATs and more — can help you be proactive in protecting your wealth. The primary objective in setting up an Incomplete SLAT is to protect the trust assets from creditors. Without proper attention to detail, the trust can also result in the continued support of an estranged spouse. Pre-Election Estate Planning Moves for High-Net-Worth Families Why wait? The Federal Estate And Gift Tax Exemption could be slashed from $11.5 Million to as low as $3.5 million and effective as soon as January 1, 2021. 6 FAQ’s. • A Spousal Life Access Trust (SLAT) is a flexible estate planning tool that provides an avenue to utilize the estate tax exemption. Despite the foregoing concerns, SLATs remain one of the most powerful estate tax planning tools available. A SLAT Offers Estate Planning Benefits and Acts as a Financial Backup Plan. ... (SLAT) is a trust where one spouse is the trustor, and the other spouse is a beneficiary of the trust during their lifetime. Using a SLAT Trust to Realize Estate Planning Benefits Making a SLAT trust can lead to lower taxes for a donor’s taxable estate, but be sure to understand the possible downsides as well. By Amanda MacArthur | December 29, 2020. SLATs are a flexible and inexpensive lifetime estate planning tool for married couples wishing to shelter assets who see the family as a team. There is no rhyme or reason for estate planners to neglect such an important part of estate planning, but yet it happens frequently. The settlor transfers assets into the trust for the benefit of the transferor’s spouse and descendants. Some of the most valuable strategies for reducing potential estate tax liability involves “squeezing” and “freezing” assets — in other words, discounting assets in various ways and locking in lower asset values. Estate Planning for 2021 and Beyond: SLATs - By : Parag Patel Date : 10-Nov-20 The estate and gift tax exemption, which allows each U.S. person to pass a certain amount of assets free of the federal estate and gift tax, was doubled under the 2017 Tax Cuts and Jobs Act. Divorce poses considerable risk to the functionality of a SLAT. Under current law, if advantageous to the planning process, transferring non-controlling slices of private equity to each SLAT should qualify for minority interest and lack of marketability discounts. Free Consults We are a Veteran Owned Business, providing 20% discounts for Veterans, First Responders, Elementary and High School teachers. SLATs are a useful tool for wealthy married couples to reduce estate, gift and generation skipping-transfer taxes while building in flexibility to an irrevocable trust. Since a SLAT is irrevocable, the impacts of divorce must be discussed when the trust is created. With discount planning the amount could be even bigger. So a divorce or the death of the non-grantor spouse will terminate this limited access. Pros: • Allows the grantor access to trust assets through his or her spouse; The most effective estate planning strategies often involve the use of irrevocable trusts. • Asset protection – A SLAT may provide How a SLAT Works. While the exemption amounts are scheduled to increase at the end of 2025, estate planning should not be postponed since legislative changes could change the limits even sooner. Spousal lifetime access trusts (SLATs) are a flexible estate planning tool that may help you to be prepared for the long term, despite what happens to the transfer tax system. A SLAT is an irrevocable trust that authorizes the trustee to make distributions to a spouse if a need arises. It may be the first step to help clients get comfortable with engaging in wealth transfer planning. So with that background on pre-2020 election planning, a twist on the SLAT planning may be useful to understand. Estate Planning: Spousal Lifetime Access Trusts (SLATs) Jennings, Strouss & Salmon, PLC ... (SLAT). Estate Planning in 2020: Consider a SLAT. Accordingly, a lawyer should be consulted in the preparation of any SLAT. A SLAT can be designed to benefit one’s children, grandchildren or future generations. It is unclear how long the lower rates and tax exemptions established by the Tax Cuts and Jobs Act (TCJA) of 2017 will last. A SLAT works when the estate planning and marital income needs are aligned and coordinated. Publications. A Spousal Lifetime Access Trust (SLAT) can be used to provide some creditor protection and mitigate estate taxes. A popular estate planning tool right now is the use of spousal lifetime access trusts (SLATs). Estate Planning: Spousal Lifetime Access Trusts (SLATs) October 19, 2020. A lifetime gift tax and generation-skipping transfer tax exemption (currently, $11.4 million each) can be used to shield contributions to the trust, and future appreciation, from transfer taxes. The grantor’s separate property should be used for purpose of making gifts to the SLAT rather than joint or community property. Are There Drawbacks to Spousal Lifetime Access Trusts? If this is a concern, the dual trust strategy could provide a valuable solution. 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