Tuesday, December 4, 2012
With 2012 coming to a close, many people have gifted large amounts of money in the attempt to take advantage of $5.12 million estate tax exemption before it decreases to $1 million in 2013. Sometimes, a married couple chooses to use a spousal limited access trust or a SLAT. Unfortunately, using a SLAT can come with some tax risk even if the planner acts to minimize the risk. There is always some chance that the assets that a grantor places within the SLAT could be included in the grantor's estate. The problem here is that the grantor might losesthe ability to use the martial deduction, which would otherwise allow him or her to transfer all of his or her assets to the surviving spouse without incurring a tax. If a person wants to use a SLAT, that person might want to consider including a provision that would use "the martial deduction in the event of gross estate inclusion in the estate of the grantor spouse."
See Charles Rubin & Robert Chaves, SLAT Backup, Rubin on Tax, Dec. 1, 2012.
Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.