global Tax Looming TCJA Expiration Makes SLAT Trusts a Valuable Wealth Planning Tool August 29, 2024 The Tax Cuts and Jobs Act (TCJA) sunset is looming. How can you make the most of the lifetime estate and gift tax exemption before its potential expiration? A spousal lifetime access trust (SLAT) could be the solution. Read on. As the expiration of the Tax Cuts and Jobs Act (TCJA) approaches, now is the time to consider creating a Spousal Lifetime Access Trust (SLAT). This unique estate planning tool allows couples to take advantage of current tax exemptions, potentially saving significant amounts in estate taxes. With the TCJA set to expire soon, the window for maximizing these benefits is closing. Here’s what you should know. What does the looming TCJA expiration mean for estate planning? Check out our blog, Plan Ahead for the Sunset of the Lifetime Estate and Gift Tax Exemption. As of 2024, an individual can give away or transfer up to $13.61 million in assets without facing estate or gift taxes, and for married couples, the combined exemption is $27.22 million. The lifetime estate and gift tax exemption is scheduled to revert back to 2017 levels (indexed for inflation) under the Tax Cuts and Jobs Act (TCJA). How can a SLAT help you maximize savings? Some of the most valuable strategies for reducing potential estate tax liability involve “squeezing” and “freezing” assets — in other words, discounting assets in various ways and locking in lower asset values. They also can allow you to hold on to a degree of control over the assets. In some cases, you can even receive an income stream from them. Utilizing a SLAT is one such option. A spousal lifetime access trust (SLAT) provides the tax benefits of an irrevocable trust while indirectly giving you access to the trust assets. The unique feature of a SLAT is that it authorizes the trustee to make distributions to your spouse. You also name your children or other heirs as beneficiaries and can apply your lifetime gift tax exemption to contributions to the trust. As with any irrevocable trust, future appreciation on the SLAT assets is shielded from transfer taxes. Setting up a SLAT now allows you to use the current higher exemption limits. How much should you place in a SLAT? Consult an estate planning attorney to decide the best amount to transfer. They can help you evaluate your estate’s value and how much of your exemption to use now. Some things to keep in mind: Gifts made to a SLAT cannot be undone- Since SLATs are irrevocable, bear in mind that once assets are transferred, you no longer have control over them. Although your spouse may receive distributions, you risk losing direct access to the assets in the unfortunate instance of divorce (or if your spouse dies before you) How do you know if a SLAT is right for you?
