Quick answer: A SLAT is an irrevocable trust where one spouse gifts assets into a trust that benefits the other spouse (and often children). The gifting spouse removes those assets from their taxable estate, while the beneficiary spouse retains access. SLATs are widely used to lock in the current federal estate tax exemption ($13.61 million per person in 2024) before potential legislative reductions.
Why Couples Use SLATs Now
The 2017 Tax Cuts and Jobs Act roughly doubled the estate tax exemption, but those provisions are scheduled to sunset after 2025 — potentially cutting the exemption nearly in half. A married couple can each fund a SLAT using their current exemption, effectively sheltering $27+ million from estate tax permanently. Even if the exemption drops later, transfers made now are protected. The IRS confirmed there's no "clawback" on gifts made under the current higher exemption.
The Reciprocal Trust Doctrine: A Critical Risk
If both spouses create SLATs benefiting each other with identical terms, the IRS may "uncross" them under the reciprocal trust doctrine and treat the trusts as if each spouse funded their own trust — eliminating estate tax benefits. To avoid this, SLATs created by each spouse must differ meaningfully: different trust terms, different trustees, different asset types, and staggered funding dates. An estate attorney experienced with SLATs is essential here.
What Happens at Divorce or Death of the Beneficiary Spouse
If the beneficiary spouse dies or the couple divorces, the surviving/divorced grantor spouse loses indirect access to the trust assets. This is a real risk. Some planners address it by naming children as additional beneficiaries so assets remain available to the family, or by maintaining separate emergency reserves outside the SLAT. The irreversibility of the trust is the price of the estate tax benefit. Work with a qualified estate planning attorney before proceeding.
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Kyle Ellison is a licensed financial professional in TX, CA, NV, MT, UT, NM helping families protect and pass on what they've built.