Are you and your spouse considering adding a Spousal Lifetime Access Trust to your current estate plan? A Spousal Lifetime Access Trust, more commonly referred to as a “SLAT,” is an estate planning tool that you and your spouse may want to use. It allows you to remove up to $11.6 million from your estate and place it in an irrevocable trust for your spouse and then your spouse can use and access it during his or her lifetime.  The SLAT allows your spouse to use distributions from the irrevocable trust while you are both living while simultaneously avoiding the estate tax and isolating those assets from creditors and that is one of the primary benefits.

However, there are a few precautions that may need to be considered in order to obtain the estate planning and asset protection benefits of a SLAT.  First, be sure that there is no express or implied agreement that the party gifting the assets in the trust will get those assets back. It should be clear that the assets in the trust will not be returned to the grantor or the trust will not be viewed as “irrevocable.” Second, the SLAT should not allow the funds in the trust to be used to pay the creditors of the grantor. Again, if the trust allows for such payments, it may not qualify as a SLAT and there may be resulting tax consequences.  Third and final, although the beneficiary of the SLAT cannot agree to return the funds to the grantor, the beneficiary can distribute the funds to their children, thereby allowing the assets to remain in the family if the beneficiary spouse should pass away while the trust remains funded. With all these precautions, we would highly recommend that you meet with your Wisconsin estate planning attorney to discuss whether adding a SLAT to your estate plan is a good estate planning tool for you and your spouse.

To find out if you and your family would benefit from a SLAT, contact our office today. We can review your finances and your estate planning goals to help make recommendations regarding the best estate planning vehicles, including SLATs, to preserve your assets for your family and minimize any adverse tax consequences.

We know this article may raise more questions that it answers. We encourage you to contact us and schedule a meeting with attorney Alan Hougum today.