What makes a trust a slat?
The Spousal Lifetime Access Trust (SLAT) As the name suggests, a SLAT is an irrevocable trust where one spouse makes a gift into a trust to benefit the other spouse (and potentially other family members) while removing the assets from their combined estates.
What assets can be put in a slat?
Generally, most asset types can be used to fund a SLAT, including life-insurance, stocks and bonds, cash, real estate, certain interests in closely held businesses or private company stock.
How much can you put in a slat?
How much can I gift to my SLAT? The Tax Cuts and Jobs Act of 2017 (“TCJA”) increased the federal estate and gift exemption from an inflation adjusted $5M per person to $10M per person. For 2022, each individual can gift $12.06M free of federal gift tax.
Who pays taxes on a slat?
Consideration #2: Income Tax Reimbursement Provisions The SLAT will be a “grantor trust” for federal income tax purposes, so any income earned by the SLAT will be taxed on the grantor’s income tax return. Some clients may want the SLAT to reimburse the grantor for the extra income taxes attributable to the trust.
What are the disadvantages of a slat?
However, there are some potential drawbacks to SLATs that you should also be aware of. One of the biggest is the fact that if the non-donor spouse dies before the donor spouse, the donor spouse will no longer have indirect access to the assets in the trust.
What happens to a slat when the beneficiary dies?
If the Trustmaker Spouse dies, the SLAT assets remain separate from the Beneficiary Spouse’s assets and continue to be protected. A SLAT can be used to avoid state income taxes. A SLAT can be designed with bloodline protection to keep assets in the family.
Can spouse be trustee of a slat?
The donor spouse should not be a trustee of the SLAT. If the beneficiary spouse is trustee of a SLAT, distributions should be mandatory or subject to an ascertainable standard. An ascertainable standard restricts distributions from the SLAT to providing for a beneficiary’s health, education, maintenance, and support.
Can you put a personal residence in a slat?
2. In addition to a SLAT, a Qualified Personal Residence Trust (or “QPRT”) is another way to make sure you use it before you lose it by transferring certain real estate into trust, as discussed below, and “freezing” the value from future estate taxation. and designates beneficiaries, usually family members.
Can you gift split to a slat?
This happens when one spouse makes a gift to a trust where the other spouse is a permissible discretionary beneficiary whose interest is not ascertainable, such as in the case of a spousal lifetime access trust or “SLAT.” Because the gift to the trust cannot be split, the allocation of the GST exemption also cannot be …
What happens to a slat when the grantor dies?
If the grantor dies while the first-to-die term rider is in force, the SLAT could then use the death benefit proceeds it would receive upon the grantor’s death to help it fund any remaining premiums on the survivorship policy.
Does a slat trust need an EIN?
The SLAT has its tax ID and any income not distributed must be reported on the trusts’ return. With careful planning, the trust can have a situs in a state with no income tax.
Can spouse split gifts to a slat?
Because the spouse is a beneficiary of the trust, gifts to a SLAT are usually not eligible for gift-splitting, where one-half of the gift is reported by each spouse. Plan on funding the trust only with the amount of your available gift tax exemption or a lesser amount.
What is a slat Trust?
A SLAT is an estate planning strategy that can perhaps address these conflicting objectives. This type of trust is created by one spouse (the “donor” spouse) who gifts property to an irrevocable trust for the benefit of the other spouse (“non-donor” spouse).
Is a slat Trust a taxable gift?
The donor’s transfer of assets to the SLAT is considered a taxable gift. If structured properly, the gift permanently removes the assets, as well as future appreciation on the assets, from the donor’s taxable estate. Even though the non-donor spouse is a beneficiary of the SLAT, the trust is excluded from the non-donor’s taxable estate as well.
What is an slat plan?
SLATs provide an opportunity to take advantage of the current federal exclusion before it sunsets, or expires, on December 31, 2025. A properly structured SLAT provides the donor limited, indirect access to the trust assets. Most estate plans are designed primarily to protect and transfer assets—today and into the future.
What is a spousal lifetime Access Trust (slat)?
The spousal lifetime access trust has become a popular estate planning strategy employed by married couples. In this era of high exemptions from the federal gift and estate tax, the spousal lifetime access trust (SLAT) has become a popular transfer tax savings strategy employed by married couples.