Fort Worth Spousal Lifetime Access Trusts Attorney

At the Law Office of Carey Thompson, PC, we are dedicated to preserving the wealth of our clients through innovative estate planning strategies, such as creating a Spousal Lifetime Access Trust (SLAT). This type of trust has traditionally been utilized to help clients protect their estates from potential tax consequences.

The 2017 tax reform legislation doubled the transfer tax exemption for individuals and couples, making it likely that most estates are no longer subject to federal estate tax. The current exemption is scheduled to expire after 2025, however, unless Congress acts to make the exemption permanent.

Because the exemption reverts back to 2017 levels ($ 5.6 million and $11.2 million) in 2026, establishing a SLAT can help protect your estate from future taxes by locking in the current exemption. Given the complexities of establishing and funding this type of a trust, the best way to protect your assets is to work with an experienced estate planning attorney.

For over a decade, the Law Office of Carey Thompson, PC has provided estate planners in Tarrant County and throughout Texas with informed representation and cost-effective service. When you consult with us, we will take the time to understand your circumstances and help to determine whether establishing a SLAT is a viable option for you. Please reach out to our office today to set up a consultation.

What Is A Spousal Lifetime Access Trust?

A spousal lifetime access trust (SLAT) is an irrevocable trust that can potentially allow a married individual to remove assets from his or her estate while also maintaining access to those assets during life. To fund the trust, the grantor, or donor spouse uses the gift tax exemption to transfer assets into the trust for the benefit of his or her spouse, as well as other family members, typically children and/or grandchildren.

While the grantor relinquishes his or her right to the trust property, the beneficiary spouse is allowed to access the trust assets, which are managed by an independent trustee.

A SLAT can be structured in a variety of ways. For instance, only the beneficiary spouse may be allowed to access funds during his or her lifetime, while children are treated as remainder beneficiaries upon the death of the primary beneficiary. The trust can also be structured to allow distributions to a beneficiary spouse and children simultaneously. Finally, It is important to note that a SLAT should not be funded with assets that are jointly owned by the grantor and spousal beneficiary.

Potential Advantages of a Spousal Lifetime Access Trust

Establishing a SLAT offers a number of benefits, such as:

  • Tax Advantages — The current estate and gift tax exemption can be used to transfer a variety of assets, particularly assets that are expected to appreciate over time, and completed transfers into the trust are protected from future taxes. In addition, SLATs are treated as grantor trusts for income tax purposes. This means the grantor or donor spouse bears the tax burden on any trust earnings while the trust essentially grows tax-free.
  • Avoids Probate — As with any irrevocable trust, assets in a SLAT are not subject to probate, which eliminates the associated probate costs and time delays; trust assets are available for distribution immediately upon the grantor’s passing.
  • Asset Protection — Assets in the trust are protected from creditors’ claims and lawsuits.

Despite these benefits, spousal lifetime access trusts are not well-suited for all estate planners. By working with the Law Office of Carey Thompson, PC, you can better determine whether your family can benefit from establishing a spousal lifetime access trust.

Possible Disadvantages

There are potential downsides of establishing a SLAT. Because the trust is irrevocable, the grantor will not have access to the assets; however, the beneficiary spouse is permitted to share distributions with the donor spouse. Another risk is the possibility of the beneficiary spouse predeceasing the grantor, in which case he or she will lose indirect access to the trust assets.

Finally, divorce also poses a potential risk to the viability of a SLAT in which a spouse is the primary beneficiary. The grantor will not have access to the trust assets and an ex-spouse may continue to receive benefits from the trust. One way to prevent this is to structure the trust so that the assets are only available to a current spouse. Ultimately, the best way to avoid these pitfalls is to work with an experienced estate planning attorney.

Contact Our Experienced Texas Estate Planning Attorneys

A spousal lifetime access trust is an important asset protection tool, however the trust must be properly structured and funded. There are other factors to consider as well, such as the reciprocal trust doctrine which may eliminate the tax exemption if two people create identical trusts for one another.

At the Law Office of Carey Thompson, PC, we are well-versed in the applicable rules governing spousal lifetime access trusts as well as other asset protection tools. When you become our client, we can help to tailor an estate plan to your unique needs. While the current gift and estate tax exemptions are slated to remain in place until 2025, now is the time to plan ahead. If you have questions about SLATs or other wealth preservation strategies, get in touch with our office today.