A SLAT trust can be one option for a married couple whose combined estate is near or above the federal estate tax exemption, which the IRS has set at $15,000,000 per person for 2026.1 Couples in that position may want to move assets out of their taxable estate without giving up all access to them, and a spousal lifetime access trust is one way some couples address that goal, with trade-offs worth understanding first. A SLAT is an irrevocable trust: once one spouse makes the gift, the assets belong to the trust, not to either spouse.
This article explains what a SLAT is, how one is set up and funded, who pays its income tax, the main pros and cons, what happens in a divorce or at a death, the reciprocal trust issue, Florida-specific points, and how a SLAT compares with other irrevocable trusts. It is educational only; an estate attorney drafts the trust and advises on the legal details.
What Is a SLAT Trust?
Quick Answer A spousal lifetime access trust (SLAT) is an irrevocable trust that one spouse funds for the benefit of the other spouse, and it may also name their children. The gift uses the funding spouse’s lifetime gift and estate tax exemption ($15 million per person in 2026), and future growth on the trust assets generally stays outside both spouses’ taxable estates.1 Because the beneficiary spouse can receive distributions, the couple keeps indirect access to the assets.3 |
The structure works because federal tax law treats the two spouses separately. The donor spouse uses their own exemption, and the beneficiary spouse is the one who may receive distributions. If the donor kept the right to the income or enjoyment of the property for life, the assets could be pulled back into the donor’s gross estate under Internal Revenue Code section 2036.4 That is why the donor spouse is not named as a beneficiary.
How a SLAT Works
The sequence below is a general outline. The exact steps, terms, and timing depend on the trust document and state law.
1. An estate attorney drafts the trust. The document names the beneficiary spouse (and any other beneficiaries such as children), the trustee, the distribution standard, and what happens to the remaining assets later.
2. The donor spouse transfers assets that they own individually. Joint or community property is generally retitled or separated first, so the gift comes from one spouse only.
3. The transfer is reported on a federal gift tax return, Form 709, which is generally due by April 15 of the year after the gift.2 The amount of the gift above the annual exclusion ($19,000 per recipient in 2026) uses part of the donor’s lifetime exemption.1,2
4. A trustee holds, invests, and administers the trust assets under the terms of the document.
5. The trustee may make distributions to the beneficiary spouse under the standard the trust sets, such as health, education, maintenance, and support.
Gift splitting, which lets spouses treat a gift to a third party as made one-half by each, requires both spouses’ consent and has statutory limits.9 Whether it can apply to a SLAT depends on the beneficiary spouse’s interest in the trust, which the attorney and CPA evaluate.
Who Pays Taxes on a SLAT Trust?
A SLAT is generally drafted as a grantor trust for income tax purposes. Under section 677 of the Internal Revenue Code, the grantor is treated as the owner of any portion of a trust whose income may be distributed to, or accumulated for, “the grantor or the grantor’s spouse.”3 In practice, that means the donor spouse reports the trust’s income and pays the income tax on it from personal funds.
This can let trust assets compound without income tax drag inside the trust, and each tax payment can reduce the donor’s remaining taxable estate. It is also a real cash cost each year, and it continues for as long as grantor trust status lasts, so the donor spouse should be comfortable funding those payments.
Who Can Be the Trustee of a SLAT?
Depending on the drafting and state law, the beneficiary spouse can sometimes serve as trustee, with distribution powers limited to an ascertainable standard (health, education, maintenance, and support). Some couples instead name an independent trustee or co-trustee, which may give more flexibility in how distributions are made. The choice of trustee carries tax and legal consequences, so it is a decision for the estate attorney to structure.
SLAT Trust Pros and Cons
The main appeal of a SLAT is the ability to use the exemption while it is available. For 2026, the exemption is $15,000,000 per person, up from $13,990,000 for 2025, according to the IRS.1 Assets moved into the trust, and their future appreciation, may be kept out of both spouses’ taxable estates, while the beneficiary spouse can still receive distributions.
The trade-offs are real. Assets held in an irrevocable trust do not pass through the donor’s estate, so they generally do not receive the basis adjustment to fair market value at death that section 1014 provides for property acquired from a decedent.5 That can mean larger capital gains for the trust or its beneficiaries when appreciated assets are later sold. The donor also keeps paying income tax on trust income,3 and access depends on the marriage continuing and the beneficiary spouse being alive.
Potential benefits | Trade-offs |
Uses the donor’s lifetime exemption while it is available1 | Irrevocable: the donor cannot take the assets back |
Future appreciation on trust assets may stay outside both taxable estates | Access depends on the marriage and the beneficiary spouse’s life |
Indirect access through distributions to the beneficiary spouse | No step-up in basis at the donor’s death for assets in the trust5 |
Grantor trust tax payments can further reduce the donor’s estate3 | The donor keeps paying income tax on trust income3 |
Possible creditor considerations, depending on state law and drafting | Legal, trustee, and administrative costs |
Summary for education only. Whether any benefit applies depends on the trust document, state law, and the couple’s circumstances.
What Happens to a SLAT in a Divorce or When the Beneficiary Spouse Dies?
A SLAT is irrevocable, so a divorce does not automatically end it. Unless the document says otherwise, the trust may continue to benefit the former spouse, while the donor may still owe income tax on the trust’s income if grantor trust status continues. That combination is one of the SLAT trust disadvantages couples weigh before funding.
One drafting option attorneys may consider is a “floating spouse” clause, which defines the beneficiary as whoever the donor is married to at the time rather than naming a specific person. Whether that fits, and how it interacts with a divorce settlement, is a question for the estate and family law attorneys.
If the beneficiary spouse dies first, the couple’s indirect access through that spouse ends. The remaining trust assets then pass under the trust’s terms, which may continue for remainder beneficiaries such as children. Some couples plan for that risk with separate resources or life insurance held outside the SLAT; this is a planning consideration, not a product recommendation.
Can Both Spouses Create a SLAT?
Both spouses can create SLATs, but nearly identical trusts can run into the reciprocal trust doctrine. In United States v. Estate of Grace (1969), the Supreme Court held that the doctrine applies when trusts are “interrelated” and the arrangement leaves the settlors in approximately the same economic position as if each had created a trust naming themselves as life beneficiary.6 In that case, the trusts were substantially identical and created at about the same time, and the value of the wife’s trust was included in the husband’s estate.6
The Court also said a tax avoidance motive does not need to be proven.6 For that reason, attorneys may vary the timing, terms, trustees, beneficiaries, and assets of two SLATs so the trusts are not mirror images. How much difference is enough is a legal judgment for counsel.
Who a SLAT May Fit
A SLAT may fit married couples whose combined estate is near or above the federal exemption, which by our calculation is $30,000,000 for a married couple in 2026 ($15,000,000 per person).1 It may also fit couples who hold assets they can give away without needing them for their own spending, and who are comfortable with an irrevocable structure and its loss of direct control.
It may be a poor fit for couples well below the exemption, for whom the cost and loss of flexibility may outweigh any estate tax benefit, and for couples who need the assets for their own retirement income. Liquidity, the stability of the marriage, and family goals also belong in the decision.
SLATs for Florida Residents
Florida has no state estate tax for deaths after December 31, 2004, according to the Florida Department of Revenue.7 For a Florida couple, a SLAT is therefore mainly a federal estate tax decision.
Florida is not a community property state, which can simplify funding a SLAT with assets owned individually by the donor spouse. Couples who moved from a community property state may still hold property that kept its community character; Florida law (section 732.217, Florida Statutes) addresses property acquired while a married person was domiciled in another jurisdiction under community property law.8 Such assets may need to be identified and separated before funding, and counsel should confirm how they are treated. For couples relocating, establishing Florida domicile is a related step.
SLATs Compared With Other Irrevocable Trusts
A SLAT is one of several irrevocable trusts used in estate planning. The table below gives a one-line comparison; for a broader overview, see our article on types of trusts in estate planning. Each structure has its own legal and tax rules, which the estate attorney applies to the family’s facts.
Trust | What goes in | Who benefits | Main use |
SLAT | Donor’s individually owned assets | Beneficiary spouse, then others such as children | Use exemption while keeping indirect access |
ILIT | Life insurance policy or premium funds | Heirs named in the trust | Hold insurance outside the taxable estate |
GRAT | Assets expected to appreciate | Grantor (annuity), then remainder beneficiaries | Shift growth above a set rate to heirs |
Dynasty trust | Assets intended for multiple generations | Children, grandchildren, and later generations | Long-term multigenerational planning |
General descriptions only; terms and availability depend on drafting and state law.
Frequently Asked Questions
A SLAT is irrevocable, so the donor cannot simply amend or revoke it. Depending on state law and the trust document, some flexibility may exist through a trust protector with defined powers or through decanting, which moves assets into a new trust with different terms. Whether either option is available is a question for the estate attorney.
Costs vary with complexity. They can include attorney fees to draft the trust, appraisals for hard-to-value assets, preparation of the Form 709 gift tax return,2 and ongoing trustee, tax, and administrative expenses. An estate attorney can give a fee estimate based on the family’s situation.
A SLAT can hold real estate the donor spouse owns individually, subject to the trust document and state law. The transfer is reported as a gift on Form 709,2 and an appraisal may be needed to value it. Homestead, mortgage, insurance, and property tax issues can apply, so counsel should review the deed and titling.
The trust generally continues under its terms for the beneficiary spouse and any remainder beneficiaries. Because the assets left the donor’s estate at funding, they are generally not included in the donor’s estate and do not receive a basis step-up under section 1014.5 Grantor trust status for income tax purposes generally ends at the donor’s death, as the attorney and CPA can confirm.
Not under the standard design. If a donor keeps the right to the income or enjoyment of transferred property for life, section 2036 can include that property in the donor’s gross estate.4 The donor’s access is indirect, through distributions the trustee may make to the beneficiary spouse.
Where This Fits Into a Broader Financial Plan
Moran Wealth Management is a fee-only, fiduciary wealth management firm. We do not receive commissions or product incentives, and we do not draft trusts or provide legal or tax advice directly. When clients consider a SLAT, we coordinate with their estate attorney, CPA, and other professionals. Our role can include helping decide which assets to fund the trust with (for example, weighing cost basis, because trust assets may not receive a step-up at death), managing the trust’s investments, coordinating titling, and reviewing the trust alongside the rest of the plan each year. Learn more about our estate planning and wealth management services.
Each professional retains responsibility for their own advice and work, and results can vary based on individual circumstances.
Schedule a Complimentary Consultation. If you are weighing a SLAT as part of your estate plan, we can help you review how it may fit with your investments and your attorney’s recommendations.
Call 239-920-4440, or email info@moranwm.com.
Resources
Sources
[1] IRS releases tax inflation adjustments for tax year 2026, including amendments from the One, Big, Beautiful Bill — Internal Revenue Service
[2] Instructions for Form 709 — Internal Revenue Service
[3] 26 U.S. Code § 677 – Income for benefit of grantor — Cornell Law School Legal Information Institute
[4] 26 U.S. Code § 2036 – Transfers with retained life estate — Cornell Law School Legal Information Institute
[5] 26 U.S. Code § 1014 – Basis of property acquired from a decedent — Cornell Law School Legal Information Institute
[6] United States v. Estate of Grace, 395 U.S. 316 (1969) — Justia U.S. Supreme Court Center
[7] Estate Tax — Florida Department of Revenue
[8] Florida Statutes § 732.217 – Application — The Florida Legislature
[9] 26 U.S. Code § 2513 – Gift by husband or wife to third party — Cornell Law School Legal Information Institute
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