Spousal Lifetime Access Trust
A spousal lifetime access trust (SLAT) is an irrevocable trust one spouse funds for the other spouse and, usually, the children. The gift uses part of the $15,000,000 lifetime exemption, and all future growth stays outside both estates. At a 40% estate tax rate, every $1 million of growth kept out of the estate is $400,000 of tax avoided at death, while the family keeps indirect access through the spouse.
Reviewed by Ebot Mbi, CPA, EA · Last reviewed October 9, 2026
Who it fits
- Married couples whose combined estate is above, or expected to grow above, two exemptions
- Families who want to use the exemption now but keep a safety valve if they need the money
- Owners of fast-growing assets such as business interests or real estate
- Couples in stable, long marriages who are comfortable with an irrevocable structure
Who it's not for
- Estates comfortably below the exemption, where the main result is giving up step-up in basis
- Couples with any doubt about the marriage's stability
- Anyone who would need the transferred assets for their own living expenses
How it works
The grantor spouse makes a completed gift to an irrevocable trust. The trustee can make distributions to the beneficiary spouse, and often the children, under standards in the trust. The gift is reported on Form 709 and uses part of the grantor's $15,000,000 exemption. Because the assets are out of the grantor's estate, the growth after the gift is out too.
For income tax, a SLAT is usually a grantor trust because income can be paid to the grantor's spouse. The grantor pays the income tax on the trust's earnings. That reduces the grantor's taxable estate further and lets the trust grow without paying its own tax.
The risks are real. If the beneficiary spouse dies first, the grantor loses the indirect access. If the couple divorces, the former spouse can remain a beneficiary, and the grantor can still owe income tax on trust income. The trust document needs to address both.
If both spouses create SLATs for each other, the trusts must differ meaningfully in terms, timing, and assets. Under the reciprocal trust doctrine, trusts that are too similar can be uncrossed and pulled back into both estates.
In Texas, a community-property state, community assets usually have to be converted to the grantor's separate property, typically through a written partition agreement, before funding. Your estate attorney drafts the documents; we handle the tax side.
Illustrative example
Illustrative: a married couple with a $40 million estate. One spouse gives $10 million of separate-property assets to a SLAT. Assume 6% annual growth for 20 years and a 40% estate tax rate on amounts above the exemptions.
- Exemption used: $10,000,000 of the grantor's $15,000,000; $5,000,000 remains
- Value in the trust after 20 years: $10,000,000 x 1.06^20 = $10,000,000 x 3.2071 = $32,071,000
- Growth kept outside the estate: $32,071,000 - $10,000,000 = $22,071,000
- Estate tax avoided on that growth: $22,071,000 x 40% = $8,828,400
In this illustration, the SLAT keeps about $8.8 million of estate tax off the family's bill, before counting the income tax the grantor pays for the trust.
The rules
| Rule | Citation |
|---|---|
| A completed transfer to an irrevocable trust is a taxable gift reported on Form 709 and applied against the lifetime exemption. | IRC §2501 and §2511 |
| Assets are pulled back into the grantor's estate if the grantor keeps the right to income, enjoyment, or control. | IRC §2036 and §2038 |
| A trust whose income may be paid to the grantor's spouse is a grantor trust; the grantor reports its income. | IRC §677(a) |
| Trusts that are interrelated and leave the grantors in the same economic position can be uncrossed under the reciprocal trust doctrine. | United States v. Estate of Grace, 395 U.S. 316 (1969) |
| Gifted assets keep the donor's basis; they do not receive a step-up at death. | IRC §1015 |
Watch-outs
- No step-up in basis: assets in the SLAT carry the original basis, so low-basis assets can leave heirs with capital gains tax.
- Divorce and the beneficiary spouse's death both cut off the grantor's indirect access. Plan for each before signing.
- Mutual SLATs that look alike invite the reciprocal trust doctrine. Vary the terms, timing, and assets.
- Gift-splitting with the beneficiary spouse is generally not available for a SLAT, so the gift uses only the grantor's exemption.
What we do
We model the estate tax saving, the income tax the grantor will carry, and the basis cost of giving up a step-up. Your estate attorney drafts the documents; we handle the tax side, including valuations coordination, Form 709, and the grantor trust reporting each year.
Questions
Can my spouse take money out of the SLAT?
The trustee can distribute to your spouse under the trust's terms. Funds your spouse receives can benefit the household, but the trust should not be used to pay your own obligations.
What happens if we divorce?
The former spouse may remain a beneficiary unless the trust provides otherwise, and you may still owe income tax on trust income. The drafting attorney addresses this up front.
Do we need a SLAT if the exemption is now permanent?
The $15,000,000 exemption is permanent and indexed, but it does not grow with your assets. A SLAT removes future growth from the estate, which matters for estates that will outgrow it.