SLATs are a flexible and inexpensive lifetime estate planning tool for married couples wishing to shelter assets who see the family as a team. As part of an Estate Plan, SLATs are principally an Asset Protection Tool.
Let’s call the spouse who creates the trust the “Grantor Spouse” and the spouse who benefits from the trust the “Beneficiary Spouse.” The Grantor Spouse creates a Spousal Limited Access Trust by executing an Irrevocable Trust for the Beneficiary Spouse’s benefit, giving the Beneficiary Spouse limited access to the trust assets. Access is “limited” to provide shelter from creditors and death taxes.
Simply put, the goal is to move assets into the SLAT and out of the Grantor Spouse’s name and estate so they can provide care for the Beneficiary Spouse limited enough to shelter the property from the Beneficiary Spouse’s future creditors, spouses and from being included in the Beneficiary Spouse’s taxable estate.
If a Pennsylvania resident couple dies and leaves their $2M estate to their children, the Pennsylvania Inheritance tax due is $90,000.00 ($2M x 4.5% Tax). If instead, the Grantor Spouse forms a SLAT for the Beneficiary Spouse, puts into that trust $1M, and both spouses die several years later, then the $1M and all the growth it may have had passes to the children, free of the Pennsylvania Inheritance Tax. At the second spouse’s death, the tax is on the remaining $1M x 4.5% = $45,000.00, a savings of $45,000 for the family.
Here are some common questions clients, beneficiaries, and Trustees ask:
No, the assets you place in a SLAT for your spouse should be your assets.
Yes, but only after analyzing the property’s long-term use plan. Our Estate Planning Lawyers can help analyze the capital gains tax and mortgage issues.
Yes, the Trustee opens an account in the SLAT’s name, deposits your transfer and is then free to use the money for investments.
Careful planning and use of the SLAT funds will prevent them from being exposed to Debt Collectors.
Yes, the SLAT can be crafted to reflect your Estate Plan and concerns.
Yes, you can include beneficiaries other than your spouse, and you can dictate who receives the remaining assets at your Spouse’s death.
You can have the SLAT crafted, so a divorce ends your current spouse’s interest and that any future “spouse” becomes the current beneficiary. You can also craft a Postnuptial Agreement as part of the gift to the SLAT addressing the gift to the SLAT and how it would be considered in a divorce.
The SLAT has its tax ID and any income not distributed must be reported on the trusts’ return. With careful planning, the trust can have a situs in a state with no income tax. This would avoid paying state income tax on non-distributed income. If you plan is to allow the trust assets to grow over time, avoiding state income tax can have a substantial positive impact.
No, a SLAT works only if you can never have the funds returned to your name. But, the SLAT can be used to pay for your children’s education, weddings or other expenses that would otherwise come from your personal accounts. Reducing your expenses isn’t a return of money to you, but it serves the same purpose.
Yes, the SLAT works just as well for LGBT married couples as any other married couple.
A SLAT provides an intriguing option for holding a Mahr. A Mahr in Islam is the mandatory payment from a groom to his bride at the marriage. The Mahr becomes the wife’s property. But by placing the Mahr in a SLAT, the Mahr is sheltered from her future creditors and is not part of her taxable estate at death. She is free to invest as she pleases and may have broad rights for using the funds for herself, and even have a wide right to name who receives what remains at her death.
If you have any questions about Spousal Lifetime Access Trusts or any other estate planning topics, please contact us to schedule a free consultation. For more than two decades Klenk Law has focused only on Estate Law. We’ve seen it all, and this experience allows us to explain complex estate law and planning techniques clearly and concisely. We make it easy for you to understand SLATs so you can make the best decisions for yourself and your family.
Peter provided outstanding advice and preparation of a will and trusts.
Peter was excellent. He explained everything very clearly and is super friendly. My wife and I originally tried using a lawyer through group legal coverage, but unfortunately the old adage - "you get what you pay for" - applied to the other lawyer, and we decided to go with a real professional.
When it came down to picking the right attorney to handle my affairs, I knew right away it was this firm. From speaking to their secretary to speaking to Peter I knew I was making the right decision. After only a few mins Peter knew right away what I was looking for and handled all my questions professionally and even gave me great feedback that put my mind at ease. All that without even giving a single penny! So of course I hired him! So far so good...
AWESOME LAWYER! Peter Klenk is an exceptional attorney and a very nice person! Today I spoke with Peter about estate planning and was impressed with by his professionalism, cordiality, and attention to detail. I highly recommend Klenk Law for probates, wills, trusts, and other issues germane to estate planning!
Great friendly staff
Tremendous firm with bright, kind and tenacious people. Great representation for our family.
I'm totally satisfied with Klenk Law. Peter has a great legal mind with the personality of the guy next door.
Everything about my experience was a 10+! Peter and his staff made what I thought would be a difficult process easy and understandable. Every detail was handled correctly. No other firm could possibly do better than Klenk Law!
Peter and his staff are very responsive and always willing to help my clients and in a cost efficient manner.
Like another reviewer, I contacted Peter through his website using the free consultation link, for a question regarding PA inheritance taxes. The question was quite technical and difficult to explain, and the answer was nowhere to be found on the web. Peter grasped precisely what I was asking, and provided a clear, helpful response (with a touch of humor) the very next day.
Answered my question quickly and referred me to a colleague that could handle my problem
Mr. Klenk, quickly understood the circumstances presented and provided clear and concise advice. This advice provided me with the information I required to progress the case to my advantage.
Peter is excellent. I had a very complicated situation with my parents' estate planning and potential Medicaid needs. Peter was very knowledgeable in estate planning matters, able to define the best solution for the situation. Additionally, he was congenial and able to communicate effectively to my senior citizen parents the benefits of estate planning. He earned my trust, and more importantly, my parents' trust in a 45 mins consultation period. Highly recommend Peter. He is very easy to work with.
Peter recently gave a presentation about Wills & Trusts at my employer, and it was fantastic! He was extremely knowledgeable and provided valuable information to the group. People were very engaged and asked several questions, all of which Peter thoroughly answered. Personally, my husband and I have selected Peter to help us with our estate planning, and he has been very helpful in providing us with all of the information we need to provide a secure future for our family. Thank you, Peter!
Peter provided outstanding advice and preparation of a will and trusts.
Peter explained things in a way that was easy to understand. Everything was done in the time frame he said it. Could not have been better!
You & your staff are the best thank you for everything.
Peter and his staff handled all of our needs in a very professional and timely matter.
Peter Klenk made a complex subject understandable and allowed us to move forward with our estate planning. He was patient with our questions and creative in the solutions he proposed.
Peter explained a complex subject very clearly, helped us to decide the best approach to managing our estate and then made it very easy for us to execute the required documents. He will be a valuable resource for years to come and clearly has a great understanding of estate law that will lead to innovative solutions for us. I would unhesitatingly recommend him for estate planning.
Fantastic customer service. Very personable and most importantly they provide great explanations of what is required based on your individual needs. Highly recommend Klenk Law for anyone that needs to create a will and estate documents.
Always professional and very responsive. Everyone on the staff that I have worked with. I look forward to continuing our relationship.
Affable...yet surprisingly cerebral estate planning atty. High marks all the way around.
Peter and his associates made things easy for us.