Spousal Lifetime Access Trust (SLAT)
A Spousal Lifetime Access Trust (SLAT) is an irrevocable trust created by one spouse for the benefit of the other spouse and often other family members, designed to remove assets from the couple's combined taxable estate by using the donor spouse's lifetime gift and estate tax exemption while preserving indirect access to the trust assets through the beneficiary spouse.
The SLAT addresses a common psychological barrier to irrevocable lifetime gift planning: high-net-worth individuals are often reluctant to transfer large sums irrevocably because they fear needing the assets in the future. The SLAT solves this by naming the non-donor spouse as a current beneficiary — the donor spouse cannot directly access trust assets, removing them from the estate, but the couple retains indirect access through the beneficiary spouse.
From an estate tax perspective, assets in a properly structured SLAT are outside both spouses' taxable estates assuming the beneficiary spouse predeceases the donor spouse or the trust is structured with appropriate spendthrift provisions. The donor spouse uses a portion (or all) of their lifetime gift and estate tax exemption — currently $13.99 million per individual in 2025 — to fund the trust. Under the current law sunsets scheduled after December 31, 2025, absent further legislation, the exemption would revert to approximately half this amount (inflation-adjusted from the pre-TCJA $5 million base), making SLAT planning particularly urgent for many families.
A critical risk of SLATs is the reciprocal trust doctrine. If both spouses create SLATs for each other simultaneously or in close proximity, the IRS may apply the reciprocal trust doctrine (established in United States v. Grace) to uncross the trusts and include assets back in each grantor's estate. To avoid this outcome, the trusts should differ materially in terms (different funding dates, different asset types, different trust provisions, different trustees, different distribution standards) so they cannot be characterized as mirror images of each other.
Another risk is divorce or death. If the beneficiary spouse dies, the donor spouse loses indirect access. If the couple divorces, the donor spouse has permanently transferred assets to an irrevocable trust for the benefit of their former spouse. Careful drafting can include provisions for successor beneficiaries or trust protector powers to address changed circumstances, but no structure can fully eliminate this risk.
SLATs funded with a donor spouse's separate property or with equal marital contributions are both common. For married couples in community property states, careful attention to asset characterization is required before funding, as transferring community property to a SLAT may inadvertently transfer the non-donor spouse's interest in community assets.