From Our “Ask a Question” Mailbag: “Can you provide SLAT Examples?”
SLAT Lawyer Kelly Barse.
Spousal Limited Access Trust SLAT Examples:
Planning for Retirement.
- Mr. and Mrs. Philadelphia each have amassed $250K earmarked for their retirement. They are concerned about asset protection planning and want to a plan to provide shelter for the assets. First, Mr. Philadelphia forms a SLAT trust for Mrs. Philadelphia during her lifetime, and then for their children at her death. He makes a gift of approximately $250K of cash to the trust. Later, Mrs. Philadelphia forms a similar SLAT trust for Mr. Philadephia and transfers her stock portfolio of roughly $250K into the trust. The trust is for Mr. Philadelphia, granting him broad powers of appointment at his death, but defaulting to their children if he does not exercise the power of appointment.
- If later, Mr. Philadelphia has creditor issues, these trusts provide protection. Mr. Philadephia no longer owns the assets he passed to Mrs. Philadelphia’s SLAT. Further, he does not own the assets Mrs. Philadelphia placed into the SLAT for his benefit.
- At Mrs. Philadelphia’s death, the trust assets are divided between the children and continue in further trust. These trusts are providing shelter from the children’s creditors and potential divorces. But, to gain the advantages a SLAT trust provides, the funds cannot return to Mr. Philadelphia.
Inheritance Tax Avoidance.
- Mr. Doylestown estate plan includes giving $200,000.00 to his siblings, but only after his wife has died. If she needs the funds, he wants her to be able to spend the money. He is aware that the Pennsylvania Inheritance Tax to siblings is 12%, or $24,000.00 if he makes this gift through his Will. Mr. Doylestown has his Estate Planning Lawyer form a SLAT for his wife. He places $200,000 in the trust. Mrs. Doylestown is free to invest the funds as she wishes and use the funds if she needs them. Mr. Doylestown dies two years later. Mrs. Doylestown then dies a year later, having not taken any funds from the SLAT. The entire amount in the SLAT now passes to Mr. Doylestown’s siblings avoiding the Inheritance Tax. A $24,000.00 savings.
- Mr. and Mrs. Wayne wish to have a portion of their estate pass to their children without paying the Pennsylvania Inheritance Tax. They form SLAT trusts for one another and fund them with $500,000.00. As each spouse dies, the trusts continue for the children. But, because the Waynes funded the trusts more than one year before each of their deaths, they avoid the tax. A $22,500.00 savings.
- A further advantage, the SLAT trust funds come available to the children immediately following Mr. and Mrs. Wayne’s deaths. The funds do not pass through probate. The funds do not appear on the estate inventory or the Pennsylvania Inheritance Tax Return. The Waynes should select a successor trustee, likely one of the children, who will promptly and efficiently divide up the trust and make distributions to the successor trusts for each child.
Follow this link to learn more about Examples of SLAT Trusts.
In Conclusion: Spousal Limited Access Trust SLAT Examples.
I hope this article about Spousal Limited Access Trust SLAT Examples. We are always happy to brainstorm with you about your own, unique situation.
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