Spousal Lifetime Access Trust Pros and Cons
If you love your spouse, you strive for their financial wellness every waking hour. A Spousal Lifetime Access Trust makes things a little easier. The SLAT is an estate planning tool that you can use to guarantee your spouse’s financial health, regardless of what the future brings. The wealth you put in it grows tax-free and safe from the reach of creditors and ambulance-chasing lawyers.
A Spousal Lifetime Access Trust makes things a little easier.
What is a SLAT?
SLAT is an acronym for spousal lifetime access trust. SLAT is an irrevocable living trust that you create for your marriage partner for their benefit now and in the future.
Unlike traditional marital trusts, your spouse and children can benefit from the Trust before your passing. Like the conventional marital Trusts, assets that you put into a SLAT qualify for gift tax exemptions.
The irrevocable nature of SLATs is an advantageous feature. For one, the assets you put into this kind of Trust are removed from your estate, in effect that reduces the size of your estate to minimize or eliminate estate taxes when you die.
The other benefit is asset protection. Your wealth in a spousal lifetime access trust is not considered part of your estate or part of your spouse’s estate. If any of you have a liability claim or owe a considerable debt, neither creditors nor litigators will be able to touch what is in the Trust.
Estate planning before the Trust
Many people focus on planning their estate for the future that comes after their lifetime. But if you have substantial wealth and a desire to protect your heirs, estate planning starts now.
Creating, managing, and implementing SLAT helps you distribute and protect your wealth for the benefit of your loved ones. It also streamlines inheritance when the time comes.
How a Spousal Lifetime Access Trust works
· The SLAT is created by a grantor that is still living for the benefit of their spouse and children in their lifetime
· The grantor makes a gift to the Trust and in so doing renounces the right to those gifts (funds and assets)
· The beneficiary spouse and kids can start earning income from the Trust right away before the grantor dies
· The beneficiary spouse is the trustee
Legal considerations when setting up and implementing SLAT
The assets that the grantor spouse puts into the Trust must be legally separate from the assets that the beneficiary owns. Spouses must separate and title assets in individual accounts before the grantor spouse transfers their wealth to the Trust.
If the assets put into the Trust are jointly owned by the two spouses, the IRS might treat the Trust’s assets as part of the beneficiary spouse’s taxable estate at death.
Changes influence the implementation of Trust in the beneficiaries’ lifetime in state and federal tax laws.
An advanced estate planning attorney can guide the grantor and the beneficiary on:
· Regulatory compliant trust funding
· Paying trust income taxes
· Initiating tax-exempt distributions
· Protecting the assets against lawsuits and wrongful taxation
· Adding or removing beneficiaries in the event of death or divorce
Spousal lifetime access trust pros and cons
The most significant advantage of SLATs trusts is that they can be used before you breathe your last. You will be able to witness the benefits. The beneficiary could use the assets in this Trust as financial support for both you and them when you are still alive.
The savings in estate tax exemption happen in your lifetime. This kind of living trust can ultimately help you double the value of wealth you pass on to your family tax-free. Future reductions in estate tax exemptions will not affect you.
Additionally, the assets in this Trust are safe from your creditors and lawsuits. And if you intend to protect the SLAT’s assets from your spouse’s creditors and lawsuits, you can use an independent trustee. The move entirely separates the Trust from you and your spouse’s interests and liabilities.
The possible drawback of the Spousal Lifetime Access trust is that the beneficiary spouse is also the trustee. If they make excessively lavish distributions to themselves, that may trigger taxation. If their distribution powers are too broad, that may erode the creditor protection function of the SLAT.
A Spousal Lifetime Access Trust is perhaps the most flexible and beneficial of all trusts in a marriage setting. An accountant and an experienced estate planning attorney can help set up and implement a SLAT that rightfully accomplishes your intentions.
Meet The Team
- Charitable Remainder Trust (CRT)
- Grantor Retained Annuity Trust (GRAT)
- Qualified Personal Residence Trust (QTIP)
- Learn more on estate planning.
Are you looking for a trust attorney in the Newport Beach area? When it comes to the practice of Trust and estates, it can be difficult finding an attorney that’s experienced in handling your specific issues.
With over 30+ years of law, 3000+ clients throughout our tenure,
you can receive in-depth legal counsel today.
Request a Case Review Today Call us at 949-706-7300Trustee Accounting Trust Law says that Trustee accounting is the Trustee's fiduciary duty to keep beneficiaries up-to-date about the "terms" of the Trust. This includes, but is not limited to, any instructions,...
California Trust & Probate Litigation Lawyers
Are you looking for an estate litigation attorney in your area? When it comes to the practice of Trust and estates, it can be difficult finding an attorney that’s experienced in handling your specific issues. Siblings contesting the trust?
- Can a Trustee sue on behalf of the trust
- Can a Trustee be held personally liable
- Can a Trustee remove a Beneficiary from a trust
- Settling a Trust After Death
- Being a Trustee of a Trust
NEED A SECOND OPINION?
Hess-Verdon is ready to help you today.
Request a Case Review Today Call us at 949-706-7300Step-up Basis at Death for Revocable and Irrevocable Trusts A step-up in basis refers to the appraisal of appreciated assets' value in a trust to inform taxation upon inheritance. Usually, what is considered...
Request a Case Review Today Call us at 949-706-7300CRT Attorney California Charitable Remainder Trust Calculator A charitable remainder trust (CRT) is an irrevocable trust, meaning it cannot be modified or terminated without the beneficiary's permission....
Hess-Verdon & Associates is your leading SNT Attorneys Call us at 949-706-7300 Special Needs Trust A special needs trust maximizes the resources available to a person with a disability to improve the quality of their life. Medicaid and Supplemental Security...