The Financial Planner

Is a Spousal Lifetime Access Trust for You?

A SLAT (Spousal Lifetime Access Trust) is an irrevocable trust created to benefit one’s spouse during his or her life, and then provide an inheritance for the children.

Assets are removed from an individual’s estate and transferred to an irrevocable trust with the spouse as the primary income beneficiary. In some cases, the spouse can also be the trustee.

The purpose of the SLAT is to allow the donor indirect access to the trust income through his or her spouse and it can provide a tax-free inheritance to heirs.

SLATS have been used in recent years to move more money out of one’s estate while the lifetime exemption is at an all-time high of about $13 million, and prior to the sunset of the Tax Cuts and Jobs Act (TCJA) at the end of 2025 when the exemption will return to pre-2017 levels adjusted for inflation (about $6.2 million). The IRS has clarified that gifts made under the TCJA will be grandfathered.

How SLATS are Funded and Taxed

SLATs are often funded with life insurance through annual gifts to pay premiums. In this situation, someone other than the insured must serve as trustee. They can also be funded with closely held business interests or stock. Gift-splitting would not apply to a SLAT because one spouse is the beneficiary, so it would be funded with only the donor’s annual exclusion amounts and use of a Crummey power to allow the gifts to pay premiums. Crummey power allows an individual to receive a gift that is not eligible for a gift-tax exclusion and convert it into a gift that is eligible.

The spouse can access the life insurance policy’s cash value for income during life, and the death benefit remains outside of the estate. Think of a life insurance SLAT as an ILIT (Irrevocable Life Insurance Trust) with the ability of the donor’s spouse to obtain income. A SLAT is a type of grantor trust, meaning the grantor would report the taxable income on his or her tax return. Using life insurance to fund the trust provides an advantage in that loans and/or the withdrawal of cash value from the life insurance policy is income tax free (subject to certain limitations).

SLAT Planning

In general, the spouse with the shorter life expectancy would set up a SLAT for the benefit of the other spouse. For illustration purposes, assume the husband is the grantor. The husband would fund it with an amount up to his available gift tax exemption and annual exclusion gifts. The trustee may make distributions for the health, education, maintenance, and support of the beneficiaries, which would be the wife and usually the children. The trustee would be given the power to “sprinkle” income and principal among the beneficiaries, so the children would not necessarily receive anything while the spouse was alive. “Sprinkling” is a provision that can be added to the life insurance and trusts. It allows the trustee to spread the benefit to the beneficiaries at their discretion.

When would SLATs make sense? A SLAT is a potential solution for individuals wanting access to income to supplement retirement savings or to keep from liquidating other assets for retirement income.

Some examples include:

  • Someone with a low basis stock portfolio may want to hold on to the stock for the step-up in basis at death.
  • A business-owner who does not want to, or perhaps cannot, pull more income from the business to fund retirement due to ups and downs of the business cycle.
  • Individuals seeking protection from creditors.
  • People who want to be able to access their assets once they are put in a trust. Although with a SLAT, access is limited through the spouse.
  • Individuals with a taxable estate preparing for a “what if my situation changes” scenario.
  • People wishing to give children or grandchildren an inheritance estate tax-free.

Tips and Strategies in Creating a SLAT

The trust would have to be drafted appropriately so that the definition of “spouse” is the current legal spouse. That would protect the donor in the event of a divorce. However, if the legal spouse dies first, the assets will go to the remainder beneficiaries, not to the donor. Having a life insurance policy on the spouse may be a potential solution. 

Sometimes, spouses will each want to create a SLAT for the benefit of the other. Spouses should be careful not to create identical, reciprocal trusts, which may bring the assets back into the donor’s estate. To avoid reciprocal trusts, create the trusts at different times or provide different rights, beneficiaries or powers in the trusts. Consult an estate planning attorney to go over specific situations.



Suzanne Tudor


Suzanne has over 35 years of experience in financial services, retiring in 2024. She was a senior investment consultant and director of financial planning at Allodium Investment Consultants, located in Minneapolis, MN. Suzanne was passionate about helping families and business owners to strategically develop and carry out their financial, legacy and philanthropic plans. Since retiring, Suzanne has had extra time for activities she loves, such as spending time with her family and making DIY home improvements.


The information provided is for educational purposes only and is not intended to be, and should not be construed as, investment, legal or tax advice. Allodium makes no warranties with regard to the information or results obtained by its use and disclaim any liability arising out of your use of or reliance on the information. It should not be construed as an offer, solicitation or recommendation to make an investment. The information is subject to change and, although based upon information that Allodium considers reliable, is not guaranteed as to accuracy or completeness. Past performance is not a guarantee or a predictor of future results of either the indices or any particular investment.