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Jun 28, 2024

SLATs- A Tax Reduction Tool

Are you protected from the upcoming changes to estate tax laws? Many families are not. Which is why our founder Harry Barth put together a simple and direct write-up of an estate tax reduction tool to get you thinking about your own planning. Take a look below…

Current estate tax exemptions are set to expire and it’s not good news. Taxes are going up. A Spousal Lifetime Access Trust (SLAT) is a strategic option to help minimize taxes.

A SLAT is an irrevocable trust established by one spouse (the grantor) for the benefit of the other spouse (the beneficiary). The key feature of a SLAT is that it allows the grantor to make gifts to the trust, thereby removing assets from their taxable estate. This can help reduce estate taxes, ensuring that more of the estate’s value is preserved for heirs.

Here’s a quick breakdown on how the SLAT operates:

The grantor creates the SLAT and transfers assets into the trust. These assets can include cash, investments, or other valuable property. Once the SLAT is set up and funded, it cannot be changed which is an important aspect of getting the tax minimization.

The spouse who is the beneficiary can access the trust’s income (and the principal in certain conditions) which provides the beneficiary support while the trust’s assets grow outside of the taxable estate.

The assets funded into the trust are excluded from the grantor’s estate including any appreciation. Which means the SLAT can be an effective strategy for many different types of businesses and property.

When the beneficiary passes away, any remaining assets in the SLAT typically pass to other beneficiaries which can be kids, grandkids or others. The assets passed are free from estate taxes.

There are tax benefits to using a SLAT and the strategy also allows the beneficiary spouse to access the trust’s assets which other types of irrevocable trust’s do not allow.

As an asset protection firm, the SLAT is a tool we use to help clients guard assets from unforeseen liability. With over 30 million lawsuits filed in the U.S. each year, tools like the SLAT are critically important for anyone who owns rental income property, a business, stocks/bonds/cash and other valuable assets.

Careful consideration is always recommended for any tool used in estate and asset protection planning and the SLAT is no different. The SLAT can be an effective strategy for married couples looking to reduce estate taxes and is part of a comprehensive estate plan design.


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