Why would a married couple use a SLAT?

To lock in exemption before it changes and to move future appreciation out of the taxable estate, without fully giving up the household's practical access to the money.

What is the reciprocal trust doctrine?

If spouses create mirror-image trusts for each other, the IRS can unwind them and treat each spouse as settlor of their own trust — erasing the benefit. Avoiding it requires meaningful differences in timing, terms, assets, and beneficiaries.

What happens to a SLAT in a divorce?

The trust remains irrevocable and the beneficiary spouse is typically still the beneficiary unless the document addresses it — often through a floating-spouse provision. This risk should be discussed candidly before funding.

Do SLAT assets get a step-up in basis at death?

Generally no, because the assets are outside the estate. That basis trade-off is the core planning tension: estate tax savings versus a lost step-up, and it depends on the asset.

Is a SLAT still worth doing given the current exemption?

For couples whose combined estate approaches or exceeds the federal exemption, moving appreciation out early is usually the highest-value move available. For estates well below it, state-level planning and basis are the bigger levers.

← Legacy JournalEstate Planning · Advanced

SLATs for Married Couples: Using Exemption Without Giving Up Access

A spousal lifetime access trust moves assets out of the taxable estate while the other spouse retains an indirect path to them. Powerful, and unforgiving if built carelessly.

February 3, 202610 min readBy Drew Jacobs, Esq.

The short answer

A SLAT — spousal lifetime access trust — lets one spouse use their federal gift and estate tax exemption now by gifting to an irrevocable trust for the other spouse's benefit. The gifted assets and their future growth sit outside both estates, while the beneficiary spouse can still receive distributions. The trade-offs are real: SLATs are irrevocable, divorce or the beneficiary spouse's death cuts off indirect access, and two SLATs must be deliberately different to avoid the reciprocal trust doctrine.

The core tension in gift planning is simple. Moving assets out of your estate removes future appreciation from estate tax exposure. It also means giving those assets away, which most people are unwilling to do while they still might need them. A spousal lifetime access trust is the structure designed around that tension.

How it works

One spouse — the donor — makes a completed gift to an irrevocable trust for the benefit of the other spouse, and typically descendants as well. The gift uses the donor's lifetime exemption. The assets and their future growth sit outside the donor's taxable estate. Because the beneficiary spouse can receive distributions, the couple retains indirect access to the trust while the marriage continues.

Done properly, the trust can also be structured to be excluded from the beneficiary spouse's estate, so the assets are not simply relocated from one taxable estate to another.

What makes it attractive right now

For 2026 the federal estate and gift tax exemption is $15 million per person, indexed going forward. Couples with estates approaching or exceeding a combined exemption often want appreciating assets — pre-exit equity, real estate, a closely held interest — moved while values are lower, because the transfer freezes today's value for exemption purposes and future growth accrues outside the estate. State-level exposure matters too: New York's estate tax cliff can make the difference between planning and not planning unusually expensive.

Whether any of this improves your position depends on your numbers, your basis, your state, and your liquidity. It should be modeled with your CPA before drafting.

The risks, stated plainly

Divorce. Access flows through the beneficiary spouse. If the marriage ends, so does the practical access, unless the trust defines the beneficiary as the person to whom the donor is married from time to time — a drafting choice with its own consequences.
Death of the beneficiary spouse. Access ends. The trust continues for remainder beneficiaries.
Reciprocal trust doctrine. If both spouses create substantially similar trusts for each other, the IRS may treat them as having created trusts for themselves and pull the assets back into their estates. Avoiding this requires meaningful, deliberate differences — not cosmetic ones.
Loss of basis step-up. Gifted assets generally carry over basis rather than receiving a step-up at death. For low-basis assets, the income tax cost can outweigh the estate tax benefit.
Irrevocability. This is a real gift. Flexibility comes from drafting — trust protectors, powers of appointment, distribution standards — not from the ability to undo it.

Funding is where SLATs succeed or fail

A signed trust that never receives assets accomplishes nothing. Funding means actual transfers: assignment of LLC or corporate interests with consent under the operating agreement, deeds for real property, retitled accounts, and a defensible valuation for anything not publicly traded. Gift tax returns should be filed to report the transfer and start the limitations period, even where no tax is due.

Who this is usually for

Married couples with a combined estate large enough that federal or New York estate tax is a live question, holding assets they expect to appreciate, with enough outside liquidity that giving away a meaningful portion does not threaten their lifestyle. Founders ahead of a liquidity event, executives with concentrated positions, and families holding appreciating real estate are the recurring profiles.

How we work on this

We design and draft SLATs and related irrevocable structures on a fixed fee quoted before work begins, and we coordinate with your CPA and financial advisor on modeling, valuation, and reporting. Licensed in New York, New Jersey, and Ohio.

Questions we hear most

Why would a married couple use a SLAT?: To lock in exemption before it changes and to move future appreciation out of the taxable estate, without fully giving up the household's practical access to the money.
What is the reciprocal trust doctrine?: If spouses create mirror-image trusts for each other, the IRS can unwind them and treat each spouse as settlor of their own trust — erasing the benefit. Avoiding it requires meaningful differences in timing, terms, assets, and beneficiaries.
What happens to a SLAT in a divorce?: The trust remains irrevocable and the beneficiary spouse is typically still the beneficiary unless the document addresses it — often through a floating-spouse provision. This risk should be discussed candidly before funding.
Do SLAT assets get a step-up in basis at death?: Generally no, because the assets are outside the estate. That basis trade-off is the core planning tension: estate tax savings versus a lost step-up, and it depends on the asset.
Is a SLAT still worth doing given the current exemption?: For couples whose combined estate approaches or exceeds the federal exemption, moving appreciation out early is usually the highest-value move available. For estates well below it, state-level planning and basis are the bigger levers.

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