How SLATs Help High-Income Families Reduce Estate Taxes and Protect Wealth (Pre-2026 Sunset)
With the lifetime estate tax exemption at a historic high—$13.99 million per individual in 2025, or nearly $28 million for married couples—many high-income families mistakenly believe they’re safe from the estate tax. But barring new legislation, this exemption is set to drop by about half on January 1, 2026, reverting to pre-2018 levels (adjusted for inflation). That means families who expect to cross the $7 million (or $14 million jointly) threshold in their lifetime should act now to lock in today’s higher limits.
One of the most flexible and powerful tools for doing this is the Spousal Lifetime Access Trust, or SLAT.
What Is a SLAT?
A SLAT is an irrevocable trust funded by one spouse (the “donor”) for the benefit of the other spouse (the “beneficiary”). Because the trust is irrevocable and completed during life, it removes the transferred assets—and any future appreciation—from the donor’s taxable estate. The kicker? The beneficiary spouse can still access the funds if needed, and the couple retains indirect benefit during their lifetimes.
A well-drafted SLAT can provide:
Significant estate tax savings by using the donor’s lifetime exemption now, before it potentially vanishes;
Asset protection, shielding gifted assets from lawsuits or divorce;
Income tax planning opportunities, depending on how the trust is structured (e.g., whether it’s a grantor trust);
Wealth transfer leverage, since any appreciation on the gifted assets is also excluded from the estate.
Why SLATs Matter Now
The IRS has clarified that gifts made using today’s higher exemption amount won’t be “clawed back” if the exemption drops in 2026. That means 2025 is the last full year to make a tax-free gift of $13.99 million—or $27.98 million as a couple—without triggering a gift tax.
SLATs are especially useful for couples who:
Have high incomes and growing wealth but haven’t yet crossed the current estate tax threshold;
Want to retain some access to funds in case of future uncertainty;
Understand the long-term tax savings from freezing asset values now.
SLAT Design: Flexibility Without Overreach
The key to SLAT planning is balancing access and control with tax compliance. That includes:
Avoiding reciprocal SLATs (two SLATs with mirror-image terms), which can cause both trusts to be pulled back into the estate;
Carefully timing funding and maintaining legal distinction between each spouse’s trust (if using two SLATs);
Considering lifetime gifting strategies that include marketable securities, closely held business interests, or even income-producing real estate;
Working with a qualified estate planning attorney to ensure the SLAT is customized for Arizona law, community property considerations, and any California residency triggers.
Final Thoughts
With the clock ticking on the current federal exemption, 2025 is a critical year for wealthy and high-income families to take action. Even if your net worth isn’t quite at the current exemption level, appreciation on real estate, market gains, business growth, or inheritance could easily push you over the limit in the coming years.
A SLAT offers a smart, flexible way to “use it before you lose it”—allowing one spouse to make a large gift out of the estate while preserving indirect access and control.
If you’re considering a SLAT or other advanced planning techniques, contact Ganser Law Offices to schedule a consultation. We’ll help you evaluate your options and create a customized strategy before the 2026 exemption cliff hits.