High-net-worth couples have no shortage of sophisticated financial tools to reduce their tax burden and preserve family wealth. But one strategy has recently surged in popularity among estate planners and affluent clients alike: the Spousal Lifetime Access Trust, or SLAT.
What Is a SLAT and How Does It Work?
A SLAT is an irrevocable trust that allows one spouse (the grantor) to transfer individually owned assets out of their taxable estate for the benefit of the other spouse (the beneficiary). While this transfer removes those assets—and their future appreciation—from the grantor’s estate, it doesn’t completely sever access to them.
"Some would say you are having your cake and eating it too." — Bob Peterson, Senior Wealth Advisor, Crescent Grove Advisors
The beneficiary spouse can tap into the SLAT’s assets for qualifying expenses such as health, education, maintenance, and support—benefiting both spouses while avoiding estate tax on future growth. For example, if $5 million in assets placed in a SLAT appreciates to $15 million over time, that $10 million gain is effectively shielded from estate taxes upon the grantor’s death.
SLATs are typically structured as grantor trusts, which means the grantor still pays income taxes on the trust’s earnings. While not an income tax strategy per se, this setup enhances the estate tax efficiency of the arrangement and can also offer protection from creditors or legal claims.
Why SLATs Are Drawing Attention Now
The spike in SLAT adoption is closely tied to tax policy uncertainty, particularly the scheduled sunset of the 2017 Tax Cuts and Jobs Act (TCJA). That legislation temporarily doubled the federal estate and gift tax exemption, which currently sits at $13.99 million per individual—or nearly $28 million for married couples.
With that exemption expected to drop by half in 2026 unless Congress extends it, many wealthy families are acting now to lock in their higher limits.
"By making a gift now, you can use the full $13.99 million, versus waiting until 2026 and only having the ability to gift around $7 million without gift tax consequences." — Bob Peterson, Senior Wealth Advisor, Crescent Grove Advisors
The transfer into a SLAT is reported on a gift tax return and counts against the donor’s lifetime gift and estate tax exemption. This time-sensitive opportunity is prompting many high-net-worth families to move swiftly before possible legislative changes take effect.
The Drawbacks and Limitations of SLATs
While SLATs offer compelling benefits, they’re not without significant risks. The most critical is that any transfer into a SLAT is irrevocable. Once the assets are gifted, the grantor has no legal claim to them. That could prove problematic in the event of divorce or the premature death of the beneficiary spouse.
Additionally, assets held jointly between spouses cannot be transferred into a SLAT—only individually owned assets qualify. And although the beneficiary spouse can access the trust funds, this setup only works as long as that spouse remains alive. If the beneficiary spouse passes away first, the remaining trust assets typically go to their designated beneficiaries—often children—outside the taxable estate.
Because of these constraints, financial advisors caution couples to ensure they can comfortably maintain their lifestyle without relying on access to the SLAT’s funds. It’s a move that should only be made with full awareness of the long-term consequences and legal implications.
Planning Ahead with Caution
The allure of SLATs lies in their ability to combine estate tax reduction with continued asset access—something few other irrevocable trust strategies allow. But the legal and financial finality of these trusts means couples must be strategic and measured.
While some families are rushing to establish SLATs before the TCJA’s generous exemptions expire, others remain wary, mindful that Congress could yet extend the current limits. Making a large, irrevocable gift today might ultimately constrain a couple’s financial flexibility down the line if tax laws don’t change as anticipated.
Ultimately, SLATs can be a powerful estate planning tool—but only when used with precision, foresight, and careful guidance.
