A Spousal Lifetime Access Trust, or SLAT, is an irrevocable trust that one spouse creates and funds for the benefit of the other spouse and, usually, the couple’s children or other descendants. The gift uses part of the donor spouse’s $15 million federal gift and estate tax exemption, and once the assets are in the trust, they and all of their future growth are out of the donor’s taxable estate. What makes the SLAT different from an ordinary gift is that the beneficiary spouse can still receive distributions, so the household keeps indirect access to money it has given away.
We design, draft and fund SLATs for New York couples and coordinate the work with their accountants and financial advisors. This page explains how the trust works, why it matters more in New York than in most states, the reciprocal trust problem that sinks careless dual SLATs, and the trade-offs a couple should understand before signing.
What Is a Spousal Lifetime Access Trust?
One spouse, the donor or grantor, transfers assets to an irrevocable trust for the other spouse, the beneficiary spouse, and often for the children and grandchildren as well. The transfer is a completed gift, reported on a federal gift tax return, and it uses a portion of the donor’s lifetime exemption. From that point on the assets, and whatever they appreciate to, are excluded from the donor’s gross estate.
The donor cannot take the assets back. The beneficiary spouse, however, can receive distributions during his or her lifetime, typically for health, education, maintenance and support. That is the balance a SLAT strikes: the tax benefit of an outright gift, with a door left open through the other spouse.
The benefits follow from that structure. Assets and growth transferred to the trust are excluded from the donor’s federal taxable estate. A properly structured SLAT also reduces exposure to the New York estate tax, which has its own exemption and its own cliff. Assets in an irrevocable SLAT are generally shielded from future creditors of the donor spouse and, depending on how the trust is drafted, of the beneficiary spouse. The trust can be built as a dynasty trust for children, grandchildren and later generations, using the donor’s GST exemption. And because the gift uses the $15 million exemption now (the 2026 figure), all future appreciation on the gifted assets grows outside both spouses’ taxable estates.
Why SLATs Matter More for New York Residents
New York has its own estate tax, and it operates independently of the federal system. New York has no gift tax, and lifetime gifts are not counted against the state exemption, subject to the three-year add-back rule for gifts made shortly before death. A lifetime gift to a SLAT therefore generally escapes New York estate tax entirely, even though the same assets would have been taxed had the donor kept them until death.
The second reason is the New York estate tax cliff. If a New York taxable estate exceeds 105% of the state exemption amount, the entire estate becomes taxable, not just the excess. A couple whose estate is approaching the exemption can fall off that cliff with a modest amount of appreciation, and lifetime gifting is the most direct way to step back from the edge. Our New York estate tax cliff calculator shows how steep the drop is.
On the federal side, the One Big Beautiful Bill Act of July 2025 made the lifetime gift and estate tax exemption permanent at $15 million per person, $30 million per married couple, for 2026, indexed for inflation. There is no longer a scheduled reduction to race against. The reason to fund a SLAT now is different: every dollar of growth on the gifted assets escapes federal estate tax and, for New York residents, escapes the New York cliff as well, since New York has no gift tax and no portability. A SLAT lets a couple use their exemptions today while keeping indirect access, which is the right fit for families who are wealthy but not so wealthy that they can comfortably part with assets for good.
How a SLAT Is Set Up
The work runs in a fixed order, and each step depends on the one before it.
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Planning
We look at the couple’s asset base, family structure, liquidity needs and tax exposure to decide whether a SLAT is the right tool, and if so, which spouse should be the donor and what should go in.
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Drafting
The trust is written so that the transfer qualifies as a completed gift for federal gift tax purposes. The distribution standard, the trustee, the powers of appointment and the remainder beneficiaries are all chosen with the couple’s goals in mind.
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Funding
Assets are retitled into the trust. Marketable securities, closely held business interests, life insurance and real estate are the usual candidates.
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Gift tax reporting
A federal gift tax return, Form 709, reports the transfer and applies the donor’s lifetime exemption to it.
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Administration
The trustee invests the assets, makes discretionary distributions and keeps records consistent with the trust terms and the trustee’s fiduciary duties.
The Reciprocal Trust Doctrine
Couples often want two SLATs, each spouse creating one for the other, so that both exemptions are used and both spouses keep indirect access. The risk is the reciprocal trust doctrine. If the two trusts are substantially identical and leave each spouse in the same economic position as before, the IRS may “uncross” them and include each trust in its donor’s taxable estate, which undoes the planning entirely.
The answer is to make the trusts genuinely different, not cosmetically different. In practice that means creating them on different dates, naming different trustees and successor trustees, using different distribution standards (a health, education, maintenance and support standard in one, a broader discretionary standard in the other), giving them different beneficiary classes, different powers of appointment and different funding assets. A pair of SLATs that has not been differentiated in ways that matter economically can collapse under IRS scrutiny.
Risks and Trade-offs
A SLAT is not right for every couple, and the drawbacks are permanent, so they deserve a hard look before funding.
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Loss of direct access
Once the trust is funded, the donor cannot reach the assets. Indirect access depends entirely on the beneficiary spouse being alive and still married to the donor.
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Divorce
If the couple divorces, the donor loses indirect access while the former spouse may continue to benefit. Defining “spouse” in the trust as the person to whom the donor is currently married can limit this risk, but the language has to be handled carefully.
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Death of the beneficiary spouse
If the beneficiary spouse dies first, indirect access ends. Life insurance and attention to family liquidity can offset the loss.
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Irrevocability
The trust cannot be freely amended. New York law does offer some flexibility, including decanting under EPTL § 10-6.6, but the couple has to accept that the terms are fixed.
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Income tax
A SLAT is usually a grantor trust, so the donor pays the income tax on the trust’s income. That is generally an advantage: the assets grow inside the trust without being reduced by tax, and every tax payment the donor makes further shrinks the donor’s taxable estate. But it is an ongoing cost that should be understood at the outset.
Choosing the Trustee
Who serves as trustee affects both how the trust is run and how it is taxed. There are three usual choices.
| Trustee | What it allows |
|---|---|
| Beneficiary spouse | Permitted if distributions are limited to an ascertainable standard: health, education, maintenance and support. |
| Independent trustee | A trusted individual or corporate trustee with no family relationship. Allows fully discretionary distributions. |
| Co-trustees | Combines family input with independent oversight. |
We help couples weigh control, flexibility and tax efficiency in choosing the structure.
What to Put in a SLAT
Not every asset belongs in a SLAT. The best candidates are assets with strong appreciation potential, because the point of the trust is to move future growth out of the estate. Closely held business interests are attractive because they may qualify for valuation discounts. Life insurance can pay a tax-free death benefit into the trust. Marketable securities with a long investment horizon and real estate with room to appreciate are also common choices.
Assets that throw off ordinary income, or that the donor expects to need for living expenses, call for more care, since the donor will be paying the tax on the income without receiving it. We coordinate the funding decision with the couple’s financial advisor and CPA.
What We Do
We run the estate and gift tax analysis, draft the SLAT around the family’s structure, and, where a couple wants two trusts, build in the differences that keep the reciprocal trust doctrine away. We coordinate with CPAs, financial advisors and insurance professionals, prepare and review the federal gift tax return, advise on trustee selection and administration, and handle later modification, decanting and review. Our earlier article on the advantages and pitfalls of a SLAT covers more of the tax detail.
Frequently Asked Questions
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Can both spouses create SLATs for each other?
Yes, but the trusts must be meaningfully different in their terms, trustees and funding to avoid the reciprocal trust doctrine.
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Is a SLAT subject to New York estate tax?
Generally, assets properly transferred to a SLAT are not included in the donor’s New York taxable estate, subject to the three-year add-back rule for gifts made shortly before death.
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How much does it cost to establish a SLAT?
It depends on the complexity, the types of assets and whether one or two trusts are created. We quote a fee after an initial consultation and review of the situation.
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When should we consider a SLAT?
When the couple’s combined net worth is approaching or exceeds the federal exemption, and especially when the estate is exposed to the New York cliff. The sooner the trust is funded, the more growth happens outside the estate.
Talk to Us
The $15 million exemption is now permanent, but the growth you leave inside your estate is still taxable, and in New York it can push the whole estate over the cliff. If you are a New York resident considering a Spousal Lifetime Access Trust, we will review your goals, evaluate your exposure and design a structure that fits. Call us at 212-233-1233 or email [email protected].
