Is a SLAT a Fit for Your Estate Plan?

A Spousal Lifetime Access Trust (SLAT) can be a powerful way for high-net-worth couples to reduce future estate taxes while keeping a pathway for the spouse to access funds. Below, you’ll find how SLATs work, the major benefits and trade-offs, why precise valuations matter, and how FMD Wealth Advisors helps clients evaluate this strategy.

1) The current estate-tax backdrop

The estate and gift tax exemption is $13.61 million per person—a historically high level. Unless Congress acts, parts of today’s law are scheduled to sunset, potentially cutting the exemption roughly in half starting in 2026. That shift could expose more families to estate tax.

One way to act now is by using a SLAT, which removes selected assets from your taxable estate while allowing your spouse to access the trust during life.

2) How a SLAT functions

A SLAT is an irrevocable trust funded by one spouse (the donor spouse) for the benefit of the other (the beneficiary spouse). Because the donor gives up direct control when funding the trust, SLAT assets are generally excluded from the donor’s estate. Depending on the document, the beneficiary spouse may have rights to receive distributions.

Funding options

• Cash, marketable securities, real estate, or other valuable property

• Transfers count toward your lifetime gift exemption

• In community-property states, joint/community assets often must be converted to separate property before funding

Access for your spouse

• Distributions may be regular or as-needed for defined purposes

• While the donor spouse is not a beneficiary, the household can still benefit indirectly if distributions help cover shared expenses

Remainder beneficiaries

• When the beneficiary spouse dies, remaining assets pass to heirs you’ve named (children, grandchildren, etc.), potentially with reduced estate tax.

3) Why couples choose a SLAT

Meaningfully shrink the taxable estate
Transferring assets to a SLAT moves them—and their future appreciation—out of the donor’s estate.

Provide financial access for your spouse
The beneficiary spouse can receive distributions, supporting lifestyle needs or unexpected costs.

Oversight via trustee choice
The donor typically cannot be a beneficiary, but may retain the ability to replace an independent trustee, offering a measure of governance.

Indirect benefit to the donor spouse
Although the donor cannot take distributions, household needs funded from the SLAT can still support shared goals.

4) Trade-offs and risks to weigh

Loss of direct control
A SLAT is irrevocable. You can’t simply call assets back; actions must follow the trust’s written terms.

Divorce considerations
If a marriage ends, the donor’s indirect benefit through the beneficiary spouse generally ends, too. Some documents limit benefits to the current spouse—careful drafting matters.

If the beneficiary spouse dies first
The donor spouse typically loses indirect access; assets usually move along to the next beneficiaries. Certain provisions can allow limited redirection, subject to counsel.

5) Tax mechanics you should understand

Estate and gift rules

• Using today’s higher exemption: A SLAT can lock in a large gift under current law and push future growth outside your estate.

• No clawback: The IRS has clarified that if exemptions fall later, prior properly used exemption amounts are not reclaimed.

Income tax treatment

• Most SLATs are drafted as grantor trusts for income taxes, so the donor pays the income tax on trust earnings.

• Because the trust itself doesn’t pay income tax, assets may compound more efficiently for heirs.

Capital gains and basis

• No step-up in basis for SLAT assets at the donor’s death. Heirs could face higher capital gains if they sell later—an acceptable trade-off for many, given the potential estate-tax savings.

• Your advisor and attorney can help weigh estate-tax benefits against possible future gains.

6) Getting valuations right

When funding a SLAT—especially with a business interest or real estate—pinpointing fair market value is essential.

• IRS attention: Large or complex gifts draw closer scrutiny.

• Qualified appraisers: Independent valuations help the gift withstand audit.

• Accurate reporting: Gifts above the annual exclusion must be reported on a gift tax return, so precise numbers reduce the risk of disputes or penalties.

FMD Wealth Advisors guides high-net-worth families through advanced estate strategies. If you’re considering a Spousal Lifetime Access Trust—or want to compare alternatives—reach out to schedule a consultation and see how it could fit into your long-term plan.

Disclosures: FMD Wealth Advisors LLC (“FMD Wealth Advisors”) is a Registered Investment Adviser. 

This material is for general information only and is not individualized legal or tax advice. Consult your attorney and CPA regarding legal and tax matters specific to your circumstances.  This content is intended to provide general information about FMD Wealth Advisors. It is not intended to offer or deliver investment advice in any way. Information regarding investment services is provided solely to gain an understanding of our investment philosophy, our strategies and to be able to contact us for further information.

All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such. The views expressed in this commentary are subject to change based on market and other conditions. These documents may contain certain statements that may be deemed forward‐looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.  

Past performance is no guarantee of future returns. 

Different types of investments involve varying degrees of risk. Therefore, it should not be assumed that future performance of any specific investment or investment strategy will be profitable. Additional Important Disclosures may be found in the FMD Wealth Advisors Form ADV Part 2A. For a copy, please Click here.