After a lifetime of building wealth, you may want to protect your financial legacy by minimizing taxes for your spouse and other beneficiaries. In 2026, the maximum amount that you can leave for your beneficiaries without incurring gift or estate taxes is $15 million per individual, or $30 million for a couple. Irrevocable trusts can be valuable financial tools for transferring wealth to the future generations, but what if you and your spouse are concerned about never having access to trust assets if they're unexpectedly needed in the future?
While there is no estate tax on assets transferred from a deceased spouse to a surviving spouse, when the surviving spouse passes there could be an estate tax due if they have sufficient assets. One option to reduce assets ending up in a surviving spouse's estate is a Spousal Lifetime Access Trust (SLAT), an irrevocable trust created by one spouse for the benefit of the other, with the remainder typically benefiting descendants on the passing of the beneficiary spouse. "While SLATs aren't the right choice for everyone, they can be a powerful tool for some high-net-worth folks to use their federal estate and gift tax exemption early and efficiently, allowing assets to grow outside the taxable estate," explains Jordan Klein, an advanced planner at Fidelity.
How SLATs work
Say a married couple has a combined net worth of $50 million. Without prior use of the estate and gift tax exemption, one spouse (the donor spouse) could transfer assets worth as much as $15 million into a SLAT for the benefit of the other spouse (and descendants as well), utilizing the donor spouse's full lifetime estate and gift tax exemption. When the beneficiary spouse dies, the trust assets pass, without estate tax, to the remainder beneficiaries (usually the children), either outright or in further trust. For individuals residing in states with an estate tax, SLATs may also help reduce local estate taxes.
- Removes potential appreciation from the estate: The spouse who sets up the SLAT locks in the value of assets transferred to trust at the time of trust funding. Any appreciation of trust assets then occurs outside the taxable estate of the donor spouse who completed the gift, as well as the beneficiary spouse, who is not treated as an owner for estate tax purposes. The donor spouse also pays income tax on the SLAT's income from the donor spouse's own assets, helping the SLAT grow income tax free, and also reducing the amount potentially subject to estate tax in the donor spouse's estate.
- Offers limited access to funds: "What really sets the SLAT apart from other gifting structures is that the beneficiary spouse can receive trust distributions from the trustee if necessary, for instance if the spouse's financial situation significantly changes," says Klein. Distributions to the beneficiary spouse can indirectly benefit the donor spouse as well, for instance by use for household expenses.
- Allows for flexibility and control: Often, the beneficiary spouse can adjust how the trust assets will be distributed to remainder beneficiaries when the beneficiary spouse passes away (the ability to make those changes depends on the language in the SLAT). The spouse may exercise this power to leave assets in further trust for their children, rather than outright. "Ultimately, some people may hesitate to make large gifts to descendants because they aren't comfortable giving up control over how the descendants ultimately benefit. The SLAT can help alleviate some of those concerns," says Klein.
Despite the flexibility that SLATs offer, clients should keep in mind that the strategy is really only effective when the assets transferred to a SLAT are not anticipated to be needed to fund the couple's standard of living. As a result, couples considering SLATs should work closely with their financial professional to ensure they can comfortably sustain their current and future standard of living without resorting to distributions from the SLATs.
SLATs and divorce
Anyone thinking of a SLAT may want to consider making arrangements to protect themselves in the event of a divorce, cautions Klein. Ordinarily, after a divorce, the beneficiary spouse will continue to benefit from the trust. However, this can be mitigated by including a clause that terminates the beneficiary spouse's interest in the trust in the event of a divorce.
In addition, if the beneficiary spouse dies first, the trust may either continue for the benefit of other family members or be terminated—with assets transferred to the remaining beneficiaries outright or via another trust.
In the event of divorce or the beneficiary spouse's death, generally, the donor spouse no longer has even indirect access to the trust assets.
Tax considerations to be aware of
Each spouse may create a SLAT for the benefit of the other to take advantage of both gift and estate tax exclusions. However, depending on the spouses' asset levels, it may well make sense for just one spouse to use up one exemption using one SLAT. If two SLATs will be used, clients and their attorneys must be careful to avoid what's called the "reciprocal trust doctrine," which allows the IRS to interpret the 2 trusts as overly similar or interrelated—in essence, set up to equally benefit both of you. "Let's say I create a SLAT for my spouse, and my spouse creates a SLAT with the same structure for my benefit," says Klein. "We might want things to be equal, but there is a risk that the structure will be unwound and treated as if we each set up a trust for our own benefit. If that occurs, then the SLAT assets would be pulled back into each donor's estate for estate tax purposes."
Your attorney might suggest structuring each trust differently, for instance funding the trusts at different times, designating different classes of beneficiaries, or varying the distribution terms and withdrawal rights. Given the complexity of this process, it's imperative to work with an experienced estate planning attorney.
Funding over time
Now that legislation has preserved the high federal estate and gift tax exemption, ($15 million in 2026, increasing for inflation starting in 2027), couples interested in maximizing use of their exemptions will have continued opportunities to contribute to a SLAT over time.
Get professional help
Ultimately, there isn't a single estate plan that works for all families. "A SLAT can be an effective tool for multi-generational tax planning. However, some clients can be troubled by the potential inequality inherent in one spouse creating a SLAT for the other," says Klein. It's important to consider all the potential benefits—and drawbacks—of any given arrangement. Consult your estate planning attorney to determine if a SLAT is right for you and your family.