- Does the changing landscape of estate tax exemptions concern you?
- Are you seeking a flexible and strategic approach to secure your estate for your beneficiaries?
- Does the idea of losing access to your financial resources worry you when considering estate planning strategies?
- Are you interested in reducing your estate tax liability while maintaining access to your wealth?
Trust and estate planning is an essential component of wealth management, which we guide our client partners through. For large estates aiming to diminish their estate tax burden, the planning process can involve significant decisions concerning their assets. These decisions can be complicated and demanding.
Spousal Limited Access Trusts (SLATs) are a valuable tool in such scenarios. They enable a grantor to gift assets into a trust for the benefit of their spouse, removing these assets from the estate while still maintaining indirect access to the funds. SLATs can have significant strategic value ahead of the changes in estate tax exemptions from January 1, 2026.
A SLAT is a type of irrevocable trust where one spouse (the grantor) transfers assets into the trust for the other spouse’s (the beneficiary’s) benefit. Because the grantor’s spouse has access to the trust assets, the grantor retains indirect access to the funds, alleviating concerns about parting with significant wealth.
Take, for instance, a married couple with a $20 million estate. Under the current $12.9 million exemption per spouse, they are not subject to estate taxes (40% tax rate!). However, the exemption is set to be cut in half on January 1, 2026, so they would have approximately $7 million subject to tax which would lead to $2.8 million in taxes upon death. However, if they establish a SLAT now and contribute assets up to the current lifetime gift tax exemption of $12.9 million, these assets will always be exempted from estate taxes. Plus, the couple will retain one spouse’s exemption for the future. In this example, if they both died on January 1, 2026, after the tax change, their estate would be tax free, saving $2.8 million for their heirs.
However, it’s important to remember that there’s no one-size-fits-all approach to estate planning. Each family’s circumstances are unique, and careful consideration should be given to potential risks, such as the death of the beneficiary spouse or divorce.
As with all complex estate planning strategies, it’s crucial to work with experienced professionals. We assist our client partners in navigating these intricacies in coordination with our network of trust and estate attorneys, aiming to optimize their wealth preservation and transfer strategies in a changing tax landscape.
Investment advisory services offered through Essential Partners, an SEC registered investment advisor. The information contained herein should not be construed as personalized investment advice. Past performance is no guarantee of future results. Investing in financial markets involves gains and losses and may not be suitable for all investors. Information presented herein is subject to change without notice and should not be considered as a solicitation to buy or sell any security.