Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

Saturday, March 12, 2011

Using Spousal Lifetime Access Trusts to Take Advantage of the Gift Tax Exemption

Gift Many high-net-worth married couples would like to take advantage of the $5 million gift tax exemption but are hesitant to do so because they don’t want to lose access to the property and its income. One method of keeping principal and income within reach is to create a spousal lifetime access trust (SLAT).

Husband can create an irrevocable SLAT for the benefit of Wife and fund it with $5 million. During Wife’s life, the trustee (who can be Wife) can distribute principal and income to Wife as needed for health, education, maintenance, and support. Thus, Husband can have indirect access to the trust assets while Wife is alive, and the assets will pass estate tax free to their children when Wife dies.

One problem with this strategy is that Husband loses indirect access to the assets upon Wife’s death. To resolve this, Wife can create an ILIT for the benefit of Husband to replace Husband’s loss in the SLAT. The SLAT could loan funds for premiums to the ILIT under a split-dollar arrangement.

See Julius Giarmarco, Spousal Lifetime Access Trusts, Producersweb.com, Mar. 8, 2011.

Special thanks to Jim Hillhouse (WealthCounsel) for bringing this to my attention.


Estate Planning - Generally, Gift Tax, Trusts | Permalink

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