Spousal Lifetime Access Trust (SLAT)

At its most basic, a SLAT is a gift from one spouse (the donor spouse) to an irrevocable trust for the other spouse’s benefit (the beneficiary spouse). Although similar to a so-called “bypass” or “credit shelter” trust, which: (i) receives assets having a value up to a deceased spouse’s remaining exemption from the federal estate tax; (ii) potentially benefits the surviving spouse; and (iii) prevents the value of the trust (the assets transferred and appreciation thereon) from being included in the surviving spouse’s gross estate (and subject to estate tax) when the surviving spouse dies, the SLAT is funded by gift while both spouses are alive.

The beneficiary spouse can receive distributions from the SLAT. Yet, the SLAT is designed to be excluded from the beneficiary spouse’s gross estate and not subject to estate tax when the beneficiary spouse dies. To prevent the value of the assets of the SLAT from being included in the beneficiary spouse’s gross estate, the SLAT will not qualify for the gift tax marital deduction (either because the donor does not make the necessary election or the terms of the trust prevent it from qualifying).

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