Understanding SLATs and SLANTs: Powerful Estate Planning Tools for Married Couples

If you’re exploring advanced estate planning strategies to reduce estate tax exposure while preserving flexibility and control, you may have heard of SLATs and SLANTs. These acronyms stand for:

• SLAT – Spousal Lifetime Access Trust

• SLANT – Spousal Lifetime Access Non-Grantor Trust

Both are powerful tools that can help high-net-worth couples transfer wealth tax-efficiently while maintaining access to funds and protecting assets for future generations.

Here’s what you need to know.

What Is a SLAT?

A Spousal Lifetime Access Trust (SLAT) is an irrevocable trust created by one spouse (the “grantor”) for the benefit of the other spouse (and often children or future generations).

The key advantages of a SLAT include:

• Tax-Free Gifting: The grantor uses a portion of their lifetime gift and estate tax exemption to make a gift to the SLAT, removing those assets—and their future appreciation—from their taxable estate.

• Continued Access: Because the non-grantor spouse is a beneficiary of the SLAT, the couple can retain indirect access to the trust assets if needed.

• Creditor and Divorce Protection: Assets in the SLAT are typically shielded from creditors and not subject to division in divorce (with careful drafting).

• Legacy Planning: SLATs can be designed to benefit children and grandchildren over generations.

Important caveats:
SLATs must be irrevocable and require careful coordination to avoid triggering the “reciprocal trust doctrine” (which could unwind the tax benefits if both spouses create identical trusts for each other).

What Is a SLANT?

A Spousal Lifetime Access Non-Grantor Trust (SLANT) is a variation of the SLAT with an important twist: it is structured as a non-grantor trust for income tax purposes.

The key benefits of a SLANT include:

• Income Tax Planning: Unlike a typical SLAT, a SLANT is responsible for its own income taxes. This can create income-shifting opportunities—especially useful in states with high income tax rates or where the trust is located in a low- or no-tax jurisdiction.

• Access and Flexibility: The non-grantor spouse can still be a discretionary beneficiary, providing indirect access similar to a SLAT.

• Charitable and Business Planning: SLANTs can be tailored to hold interests in family businesses or make strategic charitable distributions.

Planning note:
Because SLANTs are non-grantor trusts, they must be carefully structured to avoid “grantor trust” status under IRS rules, which means giving up some control over the trust.

These trusts can be used individually or in tandem and should be customized to your family’s financial goals, state residency, and long-term legacy planning objectives.