A Spousal Lifetime Access Trust, often called a SLAT trust, is an irrevocable trust designed to help a married couple plan for long-term wealth transfer while still allowing one spouse to remain a permissible beneficiary. People use SLATs to remove assets from their taxable estate while preserving a structured way for the family to benefit under the trust’s terms.

A SLAT is not a one-size-fits-all strategy. It must be drafted carefully, coordinated with tax and estate planning advice, and administered consistently with the trust document.

What Is a SLAT Trust

A SLAT trust is an irrevocable trust created by one spouse (the “grantor spouse”) for the benefit of the other spouse (the “beneficiary spouse”) and, in many cases, children or other beneficiaries. Because the beneficiary spouse can be eligible to receive distributions, families sometimes view a SLAT as offering a measure of flexibility compared to other irrevocable strategies.

At a high level, a SLAT is typically used to:

• Transfer assets out of the grantor spouse’s estate
• Establish long-term governance for family assets
• Provide potential access to trust benefits through the beneficiary spouse, subject to the trust’s terms

Connect with a trust expert to learn more about SLAT Trusts

How a Spousal Lifetime Access Trust Works

A SLAT trust is typically structured with defined roles and distribution standards:

The grantor spouse

The grantor spouse creates and funds the trust. Once assets are transferred, the trust is generally intended to be irrevocable.

The grantor spouse can gift up to the current exemption amount, and the non-donor spouse (or a specified class of beneficiaries) retains access to both principal and income during their lifetime.

While the grantor spouse surrenders all rights to trust assets, they may indirectly benefit from the non-donor spouse’s ability to receive distributions.

The beneficiary spouse

The beneficiary spouse may be eligible to receive distributions based on the trust’s distribution terms. In many SLAT designs, the trustee has discretion regarding whether, when, and how distributions are made.

A well-structured SLAT ensures that trust assets are excluded from the beneficiary spouse’s estate upon their death.

The trustee

The trustee administers the trust, follows the trust terms, and makes distribution decisions as authorized. Trustee selection and trust administration are often key to how well the strategy works over time.

Tax implications

The gift made by the grantor spouse is excluded from their gross estate for federal estate tax purposes.

The grantor spouse can allocate their generation-skipping transfer tax exemption to the trust, potentially eliminating estate taxes for future generations.

The SLAT is considered a grantor trust for federal income tax purposes, with income generated attributed to the donor spouse. The tax payment by the donor spouse is not considered a gift to the trust and is thus not subject to gift tax.

Benefits of a SLAT for Married Couples

People typically explore SLAT planning when they want to transfer wealth while maintaining a structured path for family benefit. Common reasons include:

Maximize Estate and Gift Tax Exemptions

Currently, the estate, gift, and generation-skipping transfer tax (GST) exemption is at an unprecedented high, exceeding $11 million per person. Whether an individual’s estate is substantial or more modest, it can be advantageous to utilize as much of this exemption as possible before the scheduled sunset in 2025 or any potential changes. As with most irrevocable trusts, making completed gifts using this exemption, combined with potential future appreciation, provides protection against future estate and gift taxes.

Mitigate Capital Gains Tax

SLATs can assist in mitigating capital gains tax upon the grantor’s death. Presently, under existing tax laws, if a trust holds appreciated assets, the grantor (or the spouse under Section 1041) can execute a swap or purchase the appreciated assets out of the trust and into their own name before death, usually by transferring assets of equal value to the trust (typically cash).

This is a transaction that does not impact estate taxes, as it maintains the same value in both the trust and the grantor’s estate. However, the appreciated assets, when held by the grantor (or spouse) and, consequently, the grantor’s or spouse’s estate, qualify for a step-up in basis upon death. This step-up eliminates unrealized appreciation or gains. If the estate tax is repealed and replaced by a capital gains tax at death or for gifts of appreciated assets, transferring assets to a SLAT before such a change can potentially avoid capital gains tax by gifting.

In the event of death, the same swap or substitution power used previously can be applied in the opposite direction as a reverse swap. If the grantor has appreciated assets in their estate before death, they may have the ability to transfer them into the SLAT before death and thus avoid capital gains tax upon death. In both scenarios, the SLAT can provide an opportunity for income tax planning.

Asset Protection from Creditors

SLATs, being irrevocable trusts, can offer substantial asset protection against potential future creditor claims (e.g., safeguarding assets from malpractice claims, divorce settlements of beneficiaries, and other legal actions). This protection applies to assets transferred to the trust unless they are deemed a fraudulent conveyance. When a SLAT also serves as an Irrevocable Life Insurance Trust (ILIT), it protects policy cash values during the insured’s lifetime as well as death benefit proceeds.

Leverage Grantor Income Tax Rate

Since SLATs are classified as “grantor trusts,” they are taxed to the grantor of the trust. Consequently, any trust earnings, such as dividends, interest, and capital gains, are reported on the grantor’s individual tax return. This tax structure allows the trust to potentially grow tax-free from the perspective of the beneficiaries, as the grantor assumes the tax liability.

Who Can Be a Trustee of a SLAT

This is one of the most common questions for a reason. A SLAT trust should be structured to align with the trust’s goals, the distribution standards, and the overall estate plan.

In many cases, families consider:

• A professional trustee or trust company
• An individual trustee (often a trusted family member or advisor), depending on complexity
• Co-trustees or a trust protector structure, where appropriate

Trustee selection can affect administration, distribution discretion, and long-term consistency. Your estate planning attorney can help evaluate trustee options based on the trust design and applicable law.

Key Considerations Before Creating a SLAT

A SLAT is often most effective when designed proactively and coordinated with a broader estate plan. Common considerations include:

Irrevocability and loss of direct control

A SLAT is generally intended to be irrevocable. Once assets are transferred, the grantor spouse typically cannot treat those assets as personally owned.

Distribution standards and discretion

How distributions are defined matters. The trust may allow discretionary distributions to the beneficiary spouse, but the terms and trustee process should be clear.

What happens if circumstances change

Life changes can affect how a SLAT functions, such as:

• Death of the beneficiary spouse
• Divorce
• Major changes in asset mix or family needs

A well-designed plan anticipates these scenarios.

Asset selection and funding

Not all assets are equally easy to transfer and administer in a trust. Funding strategy should consider liquidity, valuation, and long-term objectives.

Learn more here about the key considerations when creating a SLAT.

Can a SLAT Be a Non-Grantor Trust

This depends on how the trust is drafted and the tax structure chosen. Some trusts are designed to be treated as grantor trusts for income tax purposes, while others may be structured differently depending on goals and professional guidance.

Because the tax treatment can materially change reporting and outcomes, this decision should be made with qualified legal and tax advisors.

SLAT Trust Definition Summary

A SLAT trust is an irrevocable trust created by one spouse for the benefit of the other spouse (and often children). It is commonly used for estate planning and long-term family wealth strategy, combining structured governance with the possibility of distributions to the beneficiary spouse under the trust’s terms.

SLAT Trust FAQs

What is a SLAT trust?

A SLAT trust is a Spousal Lifetime Access Trust, an irrevocable trust created by one spouse for the benefit of the other spouse and often additional beneficiaries.

What is a spousal lifetime access trust used for?

A spousal lifetime access trust is commonly used to transfer assets out of an estate while allowing the beneficiary spouse to be eligible for distributions under the trust’s terms.

What is a SLAT trust explained in simple terms?

One spouse transfers assets into an irrevocable trust for the other spouse and family. The trust is administered by a trustee under specific rules, and the beneficiary spouse may receive distributions based on those rules.

Who can be a trustee of a SLAT?

Trustee choices vary. Many families consider a professional trustee or trust company for consistency, while others use an individual trustee or co-trustee structure depending on complexity and goals.

Is a SLAT trust revocable?

A SLAT trust is typically intended to be irrevocable.

Can a SLAT be a non-grantor trust?

It can be structured in different ways depending on planning and tax goals, but this should be determined with qualified legal and tax advisors.

What is the difference between a SLAT and other irrevocable trusts?

A SLAT is designed so that the beneficiary spouse may be eligible for distributions, which can provide flexibility compared to strategies where no spouse is a beneficiary. The right choice depends on the overall plan.

Have questions or would like more information? Our team is here to help.

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Note: The information provided here is for general educational and informational purposes only. It is not legal advice and should not be interpreted as such. For a thorough understanding of these topics relevant to your specific circumstances, we recommend consulting a qualified estate planning attorney. Peak Trust Company cannot provide legal advice; however, we can serve as an informational resource and provide referrals to highly skilled attorneys who can offer legal and tax guidance tailored to your specific needs.