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Use SLATs to Transfer Wealth Tax Efficiently

By John Carey, Managing Director & Portfolio Manager

What is a Slat?

Spousal Lifetime Access Trusts (SLAT) provide the ability to move funds outside of your estate without triggering transfer taxes. SLATs are helpful vehicles for multi-generational wealth planning. They can be structured as a dynasty trust to benefit the next generation or generations to come.

SLATs serve as an alternative for married couples who wish to make a sizable monetary gift to their spouse to diversify their funds and reduce the total value of their estate by transferring assets into a SLAT. 

The alternativeaspect of the SLAT lies in its omission of transfer taxes, which isn’t always possible when your funds are tied up within your estate. Another key component of the SLAT: accessibility. Should a need for a distribution arise, the non-donor spouse can access the funds easily.

Ultimately, SLATs allow couples to take advantage of the federal lifetime gift and estate tax exclusion while simultaneously retaining access to the assets and avoiding estate taxes in the future.

How SLATs Function

To create a SLAT, the donor spouse will make a gift into a trust for the benefit of the non-donor spouse. The source of these funds is typically a combination of both spouses’ estates. This initial contribution to the SLAT can consist of investments, cash, or other assets. A SLAT can even hold life insurance.

A donor spouse may also assign other family members as contingent beneficiaries. The SLAT must be assigned to the non-donor spouse during their lifetime, and in the case that the non-donor spouse passes away, it is transferred to a contingent beneficiary. 

Once a SLAT is established, the conditions of the trust cannot be changed.

The Advantages of SLATs

The main advantage of SLATs comes in the form of estate tax relief.

If you were to make a transfer of assets to your estate, it would be considered a taxable gift. However, if you were to transfer your estate assets to a SLAT, your assets and their future appreciation would be removed from your taxable estate — and your spouse’s as well.

Since SLATs are structured as “grantor trusts,” the income taxes on earnings within the SLAT are not taken directly from the trust. The donor pays for all income taxes relevant to the SLAT out of pocket. This means that taxes will not erode the value of the trust over time.

The beneficiary of a SLAT may also request distributions from the trustee during the latter’s lifetime. So, assets in a SLAT could still benefit both spouses, assuming they share costs of living. However, experts generally suggest that taking distributions from your SLAT should be a last resort, as they are reintroduced into your taxable estate.

Interested in forming a SLAT? Time is on your side. The current federal estate tax exclusion amounts are set to decrease in 2026, so funding a SLAT now would help you take advantage of the high exclusion amounts before it’s too late. 

The advisors at Griffin Asset Management can help you get started today.