SLAT
SLAT is an irrevocable trust funded with one spouse's lifetime gift exemption, naming the other spouse as a discretionary beneficiary. The structure allows the family to use the federal gift exemption (currently $13.61M per spouse) while preserving the funding spouse's indirect access to the trust assets through distributions to the beneficiary spouse.
SLATs have become extremely popular in the run-up to the TCJA sunset because they let HNW couples use the doubled lifetime exemption without giving up access to the assets. Without a SLAT, using the lifetime exemption requires gifting assets outside the family's reach permanently — a level of commitment many couples are reluctant to make even when the tax math is favorable.
The SLAT structure works like this: spouse A funds an irrevocable trust with up to $13.61M (the 2024 lifetime exemption); the trust names spouse B as a discretionary beneficiary; the trustee can make distributions to spouse B from time to time, which spouse B can use for shared family expenses; on spouse A's death, the trust assets are outside spouse A's estate and not subject to estate tax.
The primary risk is divorce or death of spouse B — both of which terminate the indirect access. Couples typically use SLATs only when the marriage is on solid ground and when they can absorb the loss of access in the unlikely event of divorce. Many planning practitioners create reciprocal SLATs (each spouse funds a trust for the other) but must be careful to avoid the 'reciprocal trust doctrine' which would unwind the planning if the trusts are too symmetrical.
Synthetic UHNW couples in the TCJA-sunset era should include SLATs as a meaningful subset, with both single-direction (one spouse funds) and reciprocal (both fund) variants. Reciprocal-trust-doctrine risk should be flagged via differentiated structures (different terms, different assets, different trustees, time-staggered funding). Divorce and death-of-spouse-B scenarios should be modelable as access-termination events.
Common pitfalls
- Creating perfectly symmetrical reciprocal SLATs — triggers the reciprocal-trust doctrine, undoing the gift-tax benefit.
- Forgetting that distributions to spouse B are theoretically available to spouse A only via shared expenses — divorce eliminates this access.
- Funding a SLAT with assets the donor spouse will need for personal liquidity — the gift is irrevocable; access is indirect at best.
- Treating SLAT as estate-protected without considering spouse B's separate estate — assets distributed to spouse B during life can re-enter spouse B's estate.
Examples
MFJ couple, 2026 combined estate $30M, exemption sunset to $7M each in 2026. Each spouse funds a SLAT for the other: $13.99M each, total $28M of exemption used. Trusts are differentiated: different trustees, different distribution terms, different invested assets, funded 6 months apart. Both SLATs survive the reciprocal-trust analysis. Post-funding combined estate: $2M, well below post-sunset exemptions. $14M+ of value transferred outside estate, captured in trust assets.