SLATs Explained: The Estate Planning Strategy High-Net-Worth Couples Should Understand

For married couples with taxable estates, the Spousal Lifetime Access Trust — or SLAT — has become one of the most widely used estate planning strategies leading up to the 2026 exemption sunset. It allows one spouse to make a large gift out of the estate while preserving some access to those assets through the other spouse.

How a SLAT Works

One spouse (the grantor) creates an irrevocable trust for the benefit of the other spouse (the beneficiary spouse) and, often, the couple's descendants. The grantor makes a gift to the trust — typically using a portion of the lifetime exemption — which removes those assets and all future appreciation from the taxable estate.

The beneficiary spouse can receive distributions from the trust for health, education, maintenance, and support (or on a more discretionary basis, depending on design). This provides the couple with indirect access to the trust assets even though the grantor no longer legally owns them.

The Tax Advantages

Assets in the SLAT are removed from the grantor's taxable estate immediately. All future appreciation also escapes estate tax. If the trust is structured as a grantor trust, the grantor pays income taxes on the trust's earnings — which is an additional effective gift to the trust, further increasing the trust's growth.

For a couple acting before 2026, a SLAT funded today could use the current elevated exemption to shelter assets that would otherwise be taxed at rates up to 40 percent.

The Reciprocal Trust Doctrine Risk

If both spouses create SLATs for each other — a common instinct to ensure both spouses have access — there is a risk that the IRS will apply the 'reciprocal trust doctrine,' treating the two trusts as if they were never created and pulling the assets back into each grantor's estate.

Avoiding reciprocal trust problems requires that the two trusts be meaningfully different — different trustees, different distribution standards, different timing, different assets. Careful drafting and implementation are essential.

What Happens if the Marriage Ends

A SLAT is irrevocable. If the beneficiary spouse dies, the grantor spouse loses indirect access to the trust assets — the trust continues for the benefit of descendants, but the grantor no longer benefits from distributions. If the marriage ends in divorce, the situation can be even more complicated: the grantor spouse has transferred assets to a trust that now benefits a former spouse.

SLATs should be designed with careful attention to these contingencies, including provisions that address what happens to the trust if the beneficiary spouse predeceases the grantor.

Reporting Requirements

Funding a SLAT requires a gift tax return (Form 709). The trust will typically file as a grantor trust, reporting income on the grantor's 1040. When the grantor trust period ends, or if the trust includes non-grantor provisions, Form 1041 filings will be required.

Proper reporting from day one protects the strategy from IRS challenge and ensures the planning holds up as intended.