The SLAT Strategy: Locking in the Exemption Without Losing Access
Tax Tips / Estate & Trust
The SLAT Strategy: Locking in the Exemption Without Losing Access
💡 Executive Summary
- Problem: The $13M+ Estate Tax Exemption is scheduled to be cut in half in 2026 (Use it or Lose it).
- Solution: Husband creates a trust for Wife (or vice versa). The assets are removed from his estate, but Wife can still access them.
- Result: You secure the $13M exemption permanently while retaining “indirect access” to the funds through your spouse.
⚠️ RECIPROCAL TRUST DOCTRINE
If Husband and Wife create identical trusts for each other at the same time, the IRS will “uncross” them and nullify the tax benefit.
Fix: Make them different (Structure, Timing, Trustees, or Assets).
If Husband and Wife create identical trusts for each other at the same time, the IRS will “uncross” them and nullify the tax benefit.
Fix: Make them different (Structure, Timing, Trustees, or Assets).
The SLAT (Spousal Lifetime Access Trust) is the undisputed champion of the “2026 Sunset” planning. It addresses the psychological barrier of estate planning: the fear of giving away too much too soon.
🧐 Core Definition: “Grantor Trust”
A SLAT is usually a “Grantor Trust.” This means the Grantor (Creator) continues to pay the income tax on the trust’s earnings. This allows the trust assets to grow 100% tax-free, compounding faster for heirs.
A SLAT is usually a “Grantor Trust.” This means the Grantor (Creator) continues to pay the income tax on the trust’s earnings. This allows the trust assets to grow 100% tax-free, compounding faster for heirs.
Performance Simulation
Estate Tax Impact (Post-2026 Sunset)
Do Nothing (Exemption Drops)
$2.8M Tax Liability
Tax Hit
SLAT Strategy (Lock-in $13M)
$0 Estate Tax
Full Protection
Who Can Touch the Money?
| Person | Role | Access Rights |
|---|---|---|
| Grantor (You) | Creator | Zero Access (Directly) |
| Spouse | Beneficiary | Full Access* (HEMS) |
| Children | Final Beneficiary | Future Access |
“A SLAT is like putting your money in a safe where only your spouse has the combination. You can’t open it, but your spouse can open it and buy you dinner.”
🔗 Related BMT Playbooks (Internal)
🛡️ The “Why”: Understanding the 2026 Tax Sunset ⚖️ The Alternative: QDOT (If Spouse is Non-Citizen) ✅ Next Step: Turning a SLAT into a Dynasty Trust🏛️ Institutional Resources (External)
📜 Legal Text: IRC § 677 (Income for Benefit of Grantor/Spouse) ⚖️ Case Law: U.S. v. Estate of Grace (Reciprocal Trust Doctrine) 🏛️ IRS Official: Estate Tax Overview
BMT designs for tax reality, not theory.