Although many advisors expected considerable and unfavorable revisions to estate and tax laws in 2021, last year’s legislative proposals resulted in little change. In fact, the 2022 federal gift and estate tax exclusion amount is now at an all-time high of $12.06 million. As this amount is scheduled to be reduced to $5 million (adjusted for inflation) as of January 1, 2026, consider yourself lucky – there is likely still time to implement estate planning techniques that take advantage of current benefits.
Spousal Lifetime Access Trusts (SLATs) can be a great way to minimize liability exposure and utilize the all-time-high estate tax/gift exemption while continuing to allow access to funds.
How a SLAT Works
Generally speaking, a SLAT is a multi-generational trust established by one spouse (grantor) to benefit the other, as well as others such as children or grandchildren. The grantor spouse transfers assets, via gift and/or sale, to a SLAT for the primary benefit of his or her spouse, allowing the grantor to properly plan for his or her estate/gift tax exemption. With proper SLAT planning, the spouse benefiting from the transfer can be both the SLAT’s trustee and the primary beneficiary. This means the benefiting spouse can maintain access to assets protected in the SLAT. Further, there are no additional income tax returns needed with SLAT planning while the grantor is still alive and mentally able.
Protects future appreciation of assets in the SLAT from estate/gift and other transfer taxes
Allows for more control and efficient management of assets
Allows for the efficient use of the 2022 $12.06M estate/gift tax exemption
Provides asset protection from mental disability, creditors, divorces, etc.
Allows the benefiting spouse and other beneficiaries access to the SLAT assets while alive
Utilizes the generation-skipping transfer tax (“GSTT”) exemption, avoiding transfer taxes over multiple generations
Can be utilized with valuation discount planning to transfer additional wealth among generations
Yields additional advantages when leveraged with proper life insurance planning
The current estate/gift tax exemption offers unprecedented opportunities for high net worth families to reduce their transfer tax exposure. Any transfers made before the exclusion law sunsets are likely protected from future taxes. Do not let your luck run out – now is the time to review your plan.
Kelleher + Holland, LLC can provide you with the guidance you may need to navigate the many complex estate planning opportunities available. Contact us to discuss strategies that can benefit you most, or visit our website to schedule an appointment.