When it comes to sophisticated estate planning, particularly for high net worth couples, few tools offer the same level of flexibility, tax efficiency, and control as a Spousal Lifetime Access Trust (SLAT).
As federal estate tax exemptions continue to face political uncertainty and sunset provisions loom, many affluent families in Southlake, Westlake, Trophy Club, Keller, Colleyville, and Grapevine are turning to SLATs to proactively secure their legacy while retaining access to wealth during their lifetimes.
This blog explores what SLATs are, how they work, and when they may be the right strategic move for your family’s estate plan.
What Is a SLAT?
A Spousal Lifetime Access Trust (SLAT) is an irrevocable trust created by one spouse (the “grantor”) for the benefit of the other spouse (the “beneficiary spouse”), with potential benefits extending to children or future generations as well.
Key features include:
- The assets in the SLAT are removed from the grantor’s taxable estate, helping reduce estate taxes.
- The beneficiary spouse can receive income or principal distributions from the trust during their lifetime.
- The grantor, although not a direct beneficiary, may benefit indirectly through the spouse.
- After the beneficiary spouse’s death, the remaining trust assets pass to heirs, typically gift and estate tax-free if structured properly.
This strategy combines the tax advantages of gifting with the comfort of financial flexibility—making it ideal for couples who want to lock in high estate tax exemptions now while keeping a financial safety net.
Why Are SLATs Gaining Popularity?
The current federal estate tax exemption ($13.61 million per individual in 2024) is set to sunset at the end of 2025, potentially dropping to around $7 million unless legislative changes are made.
For high net worth couples, this creates a narrow window to:
- Transfer wealth without triggering gift or estate tax
- Lock in today’s higher exemption before it’s reduced
- Minimize estate tax exposure for future generations
SLATs are a particularly attractive tool in this environment because they allow for significant lifetime gifting while maintaining access through the beneficiary spouse.
How a SLAT Works: A Simple Example
Let’s say Jack and Diane are married and reside in Southlake, Texas. They each own substantial assets and are concerned about future estate taxes.
- Jack sets up a SLAT and transfers $5 million into it.
- Diane is named as the primary beneficiary; their children are contingent beneficiaries.
- The SLAT is designed to allow distributions to Diane as needed for health, education, maintenance, or support.
- Because the trust is irrevocable, the $5 million (plus any growth) is removed from Jack’s taxable estate.
- If Jack passes away first, Diane can continue to benefit from the trust. When Diane passes away, the remaining assets go to their children—without being taxed again in Jack’s or Diane’s estate.
If properly drafted and administered, this strategy allows the couple to retain access to their wealth while taking advantage of today’s favorable tax laws.
Benefits of a SLAT
✔️ Leverages Current Estate Tax Exemptions
Allows individuals to make large gifts now, locking in the current exemption amount before potential legislative reductions.
✔️ Provides Indirect Access to Assets
Because the beneficiary spouse can receive distributions, the grantor may indirectly benefit from the trust assets.
✔️ Protects Assets from Creditors
Once transferred to a SLAT, the trust assets are typically protected from creditors, lawsuits, or divorces involving the grantor or beneficiaries.
✔️ Enables Multigenerational Wealth Transfer
SLATs can be designed to continue benefiting children, grandchildren, or even be structured as dynasty trusts for long-term wealth preservation.
✔️ Customizable Control Mechanisms
You can include specific instructions about investment, distributions, or appoint a trust protector to oversee the trust’s administration.
Potential Drawbacks and Considerations
⚠️ Irrevocability
Once assets are transferred into a SLAT, the grantor gives up legal control. There’s no undo button—so planning must be precise.
⚠️ Reciprocal Trust Risk
If both spouses create SLATs for each other with similar terms, the IRS may view them as reciprocal trusts, potentially pulling them back into the estate. Proper differentiation is critical.
⚠️ Access Risk if Spouse Dies or Divorces
The grantor loses access to the SLAT’s benefits if the beneficiary spouse passes away or the couple divorces—this risk must be factored into the design.
⚠️ Administrative Complexity
SLATs require careful legal drafting, fiduciary oversight, and ongoing administration to comply with IRS rules and maintain intended benefits.
Is a SLAT Right for You?
SLATs are not for everyone. They’re typically best suited for:
- Married high net worth couples with a strong relationship and long-term wealth preservation goals
- Individuals seeking to reduce estate tax exposure without fully giving up indirect access to assets
- Families concerned about future tax law changes, especially the sunset of current exemptions in 2025
- Clients who want to preserve privacy, protect assets from creditors, and create multigenerational legacies
If you’re a business owner, investor, or entrepreneur in the Southlake area and beyond, SLATs may serve as a powerful pillar in your advanced estate planning strategy.
Serving Southlake and Surrounding Texas Communities
At Peabody Law Firm, led by estate planning attorney Ryan Peabody, we specialize in building advanced estate plans tailored to your life, legacy, and long-term vision. Based in Southlake, TX, we proudly serve individuals and families throughout Westlake, Trophy Club, Keller, Colleyville, Grapevine, and surrounding communities.
Our team helps clients design, draft, and administer Spousal Lifetime Access Trusts and other high-level wealth transfer tools, always grounded in personalized guidance and risk-aware legal strategy.
Legal Disclaimer
This blog is intended for educational purposes only and does not constitute legal advice. Estate planning is highly individualized, and readers are strongly encouraged to consult with a qualified estate planning attorney before implementing any strategy discussed herein.