Being married has its perks. Even in the estate planning field, married couples may have access to sophisticated tools and strategies that don’t work for single people. The spousal lifetime access trust even includes the term “spousal” in its name. In this article, we will explore the spousal lifetime trust and see what makes it tick.
Though trusts are a common estate planning tool, it’s unlikely that people spend much time thinking about how trusts work or how they are constructed.
Before discussing more advanced trusts, it’s important to know the major components of trusts:
- The person who creates and funds the trust (the grantor);
- A person or financial institution to serve as trustee;
- At least one beneficiary;
- Trust assets; and
- A purpose.
Trusts can be established for protecting assets, avoiding probate, preserving, and transferring wealth, supporting a loved one with special needs, and so on.
What Is A SLAT?
A Spousal Lifetime Access Trust (SLAT) is also known as a Family Bank Trust. In general, it is a lifetimes trust that provides for the grantor’s spouse while maximizing annual and lifetime gift tax exemptions.
Often used for wealthy married couples, a SLAT is an irrevocable trust established by one spouse for the benefit of the other. Another benefit is that the assets in the SLAT should not become part of either spouse’s estate and thus may help avoid or minimize estate taxes.
For example, let’s consider Brad and Lucinda. They own and manage a successful family business. In fact, they expect the business to continue increasing in value. Concerned about asset protection and lowering estate taxes, Brad and Lucinda decide to explore trust options. They eventually moved one-half of Brad’s interest in the business to a SLAT. His business interest should be safe from estate taxes and creditors.
This may sound fairly easy, but there are significant consequences if the SLAT is formed incorrectly. In addition, the surviving spouse may have to refrain from commingling trust funds with her personal funds.
Learn more about Spousal Lifetime Access Trusts
Should a spousal lifetime access trust be part of your estate plan?
The attorneys at Virtus Law assess their clients’ circumstances and help then choose the right estate planning options. Contact Virtus Law at 612.888.1000 or send us an email at firstname.lastname@example.org. Our main office is in Minneapolis, with other offices located in Maplewood, Cambridge, Edina, Mendota Heights, and Red Wing.