As of 2026, the federal estate tax comes with an exemption of $15 million per person and $30 million per married couple, though some states have significantly lower exemption rates.52241 Those in the high-net-worth (HNW) category may find themselves affected even with the large federal exemption. Spousal Lifetime Access Trusts (SLATs) have become a popular vehicle for high-net-worth individuals to shelter assets, particularly assets that are likely to increase over the donor's lifetime. SLATs are essentially credit shelter or bypass trusts that are set up during the donor's lifetime instead of at death.

SLATs allow one spouse (the donor spouse) to irrevocably gift assets to the other spouse (the beneficiary spouse) and/or other family members while still allowing indirect access to those assets via distributions of income and/or principal for the purpose of "health, education, maintenance or support." Generally, assets contributed to a SLAT are neither (1) taxable in either spouse's estate nor (2) available to creditors as of the date they are gifted. However, there are exceptions that may leave the assets vulnerable in certain circumstances.

Are SLATs right for you?

Many factors must be considered before deciding whether to create a SLAT, including the following:

• Because the trust is irrevocable, the donor cannot simply change his or her mind and remove assets from the trust or change beneficiaries. This can create issues when circumstances change unexpectedly. Suppose, for example, the donor and beneficiary spouses divorce after the SLAT is created. In that case, the language in the trust document matters. Language that defines the "spouse" as the person to whom the donor is married at the time of death or that specifies that the status of beneficiary shifts from the spouse to children or grandchildren upon divorce can ensure that the assets will be distributed according to the donor's wishes.
• Assets placed in the trust must be solely owned by the donor spouse. They may not be owned jointly. For example, a vacation home may not be placed in the trust if it is jointly owned by the donor and beneficiary spouses.
• Certain assets, particularly interests in closely held businesses, real estate, or other hard-to-value property, should generally be professionally appraised to support the value reported for gift tax purposes.
• Interest in a family business, for example, may not be included if the business has never been valued.
• The donor spouse no longer has indirect access to the trust assets if either of the following is true:
  • The beneficiary spouse dies.
  • The spouses divorce.

Careful drafting of trust documents can help prevent unintended consequences if circumstances change. In some instances, it may be advantageous to have each spouse set up a separate SLAT. However, this must be done in a way that does not trigger the "reciprocal trust doctrine." That doctrine, which is triggered when the donor and beneficiary spouses create two identical or substantially similar trusts for the benefit of each other, may result in the trusts’ being undone, making the trust assets taxable.

Consider the implications

Because these trusts are intended to protect generational wealth, they are designed as long-term trusts that pass wealth from generation to generation without incurring estate and gift taxes or generation-skipping transfer taxes. The rules are complicated, and it is important that the language in the trust document is carefully drafted.

One tradeoff of transferring appreciating assets to a SLAT is that those assets generally will not receive a step-up in basis at the donor spouse's death because they are no longer included in the donor's taxable estate. To address this issue, many SLATs grant the donor spouse a substitution power, which may allow low-basis assets to be exchanged for high-basis assets of equivalent value prior to death.

State estate taxes are another potential snarl. In some states that impose their own estate tax, transferring assets to a properly structured SLAT during life may reduce future state estate tax exposure by removing appreciating assets from the taxable estate.

Final thoughts

There are many other provisions that can be included in the trust document in order to ensure that the donor spouse's intentions are fulfilled. Consulting with a tax expert is the best way to be sure there will be no surprises. Contact our Estate Planning team to learn more about the options available to you.

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