A key, yet sometimes overlooked, part of your financial plan is estate planning. The complexity of your estate plan will reflect your financial situation. A thorough estate plan considers strategies to maximize current tax exemptions. For high-net-worth couples, especially in second marriages with assets held in individual ownership, an impactful tax-saving opportunity is the spousal lifetime access trust (SLAT), which has become even more beneficial.
The One Big Beautiful Bill Act (OBBBA) increased the federal lifetime gift exemption permanently to $15 million per individual (indexed for inflation), effective January 1, 2026. This means a married couple can now shield $30 million from federal estate taxes.
The new law provides a massive, permanent runway for tax-free wealth transfers. A thorough estate plan starts with the basics: wills, POAs, medical directives, etc. But as your wealth, wishes, and complexity increase, trusts will likely play an integral role in your estate plan.
What is a SLAT?
A SLAT is similar to moving assets from your home into a secure storage unit owned by your spouse. While the assets are no longer technically yours, your family can still benefit from them. Upon your passing, these assets are excluded from your estate.
The SLAT is an irrevocable trust in which one spouse gifts assets to the other spouse. The assets are no longer in your taxable estate, but your spouse can still receive distributions from the trust. Your children or grandchildren are typically named as the ultimate beneficiaries.
Why SLATs Still Matter with a $15 Million Exemption
Numerous factors make SLATs worth considering:
Removing future growth from your estate. When you transfer assets to a SLAT, you’re removing the current value and all future appreciation out of your estate. A $5 million investment that grows to $15 million over 20 years? That growth has been removed from your taxable estate. This is particularly effective for assets you expect to appreciate significantly, like business interests or real estate.
Political uncertainty. Tax laws change. Always. While the current exemption is “permanent,” don’t believe it will last. Don’t worry, assets transferred to the SLAT under today’s exemption are shielded. There’s no “clawback” if the exemption later decreases. Making gifts now locks in today’s favorable rules.
Don’t forget about State estate taxes. Many states have estate taxes with thresholds below the federal exemption. Pennsylvania doesn’t have an estate tax, but if you own property in states like Massachusetts ($2 million threshold), Oregon ($1 million), or New York ($7.26 million), a SLAT can help reduce exposure to those state-level taxes.
Asset protection. Assets in a properly structured SLAT are generally protected from creditors, both yours and potentially your spouse’s, depending on the trust terms and state law.
Control over inheritance. For blended families or second marriages, a SLAT lets you specify exactly who benefits from assets you’ve accumulated individually. You can ensure your children from a prior marriage are protected while still providing for your current spouse.
Key Rules to Understand
It’s irrevocable. Once assets are placed in the trust, you cannot take them back. This isn’t a strategy to pursue unless your financial plan shows you won’t need these assets for your own living expenses.
Only individually owned assets qualify. You cannot fund a SLAT with jointly owned property. The assets must be in the name of the spouse making the gift.
Watch the reciprocal trust doctrine. If both spouses want to create SLATs for each other, the trusts cannot be mirror images of each other. Creating two identical trusts simultaneously can cause the IRS to disregard both. There needs to be meaningful differences. This could include different funding amounts, beneficiaries, creation dates, or distribution standards.
Indirect access only. You, as the spouse who created the trust, cannot directly benefit. Distributions must go to your spouse’s individual account, not a joint account. If your marriage is anything less than rock solid, a SLAT may not be the right choice.
No step-up in basis. Assets in a SLAT don’t receive a step-up in basis at death, the way assets in your personal estate would. For highly appreciated assets, this means your beneficiaries may face capital gains taxes they wouldn’t otherwise owe. This trade-off needs to be compared with the estate tax savings.
Is a SLAT Right for You?
If your estate is comfortably below the exemption today but includes assets likely to appreciate significantly, a business, real estate, concentrated stock positions, a SLAT deserves a serious look. That future growth is precisely what you’re trying to get out of your estate.
The catch? You’re giving up control permanently. Your financial plan needs to clearly show that you won’t need these assets to fund your retirement. If there’s any doubt, this isn’t the right strategy.
When we work closely with estate attorneys. The trust document matters. The funding strategy matters. Getting this wrong can mean the IRS disregards the whole thing, so it’s not a DIY project.
If you know someone who may benefit from discussing how their estate plan fits into their wider financial plan, please encourage them to get in touch.
