Spousal Lifetime Access Trust (SLAT) in Utah
A spousal lifetime access trust, or SLAT, is an irrevocable trust that one spouse creates and funds for the benefit of the other spouse, usually with children or other family members as the remainder beneficiaries. The gift uses part of the grantor's lifetime gift and estate tax exemption, and the assets and their future growth are generally outside both spouses' taxable estates while the beneficiary spouse can still receive distributions. A SLAT fits a narrow group of couples: those whose combined estates may exceed the federal exemption, who have plenty of other assets to live on, and who accept the risks of divorce, death and a lost basis step-up. It does not guarantee any tax result.
Utah has no state estate tax or inheritance tax (Tax Foundation), so for a Utah couple the question is the federal estate tax.
How a SLAT works
One spouse, the grantor, creates an irrevocable trust and transfers assets to it. An independent trustee holds the assets and has discretion to make distributions to the beneficiary spouse, and often to children, for health, education, maintenance and support. Using that kind of standard keeps the beneficiary spouse's rights from becoming a general power of appointment under IRC § 2041 if the spouse also serves as a trustee. When the beneficiary spouse dies, the remaining assets pass to the children or other beneficiaries named in the trust.
The grantor is not a beneficiary and has no direct access. The grantor benefits indirectly while the marriage lasts and the beneficiary spouse is living, because household spending can be funded by distributions to the spouse.
Who should and should not use a SLAT
A SLAT may fit a couple with a large or growing estate, good health, a stable marriage, and enough assets outside the trust to support their lifestyle. It is a poor fit if the estate is well below the exemption, the marriage is uncertain, the grantor would depend on trust assets, or the assets have so much built-in gain that the lost basis step-up costs more than the estate tax saved.
Also weigh portability. Under 26 U.S.C. § 2010(c)(4) and (5), a surviving spouse can use the deceased spouse's unused exclusion if the executor files an estate tax return and makes the election on time. For many couples that, together with a revocable trust, covers the same ground without an irrevocable gift. If creditor protection is the goal rather than estate tax, a Utah asset protection trust addresses a different problem.
Gift tax, GST and the exemption
Funding a SLAT is a completed gift. You report it on a federal gift tax return, and no tax is due as long as the total of your lifetime gifts stays within your exemption. The gift and estate tax exemption is one unified amount: what you use on gifts is no longer available at death. Under 26 U.S.C. § 2010(c)(3), the basic exclusion amount is $15,000,000 per person for 2026 and is adjusted for inflation after that (IRS). Current law has no sunset date for the amount, but Congress can change it, so a plan should not depend on the number staying put.
If the trust benefits grandchildren or later generations, generation-skipping transfer tax can apply, and the gift tax return is where GST exemption is allocated.
Income tax: grantor trust status
Because trust income can be paid to your spouse, a SLAT is ordinarily a grantor trust for income tax purposes under IRC § 677(a). That means you report the trust's income and pay the tax on it with your own funds, which lets the trust assets grow without tax drag but is also a cost you carry. Some SLATs add a power to substitute assets under IRC § 675(4)(C), and that power must be drafted carefully. Utah Code § 75B-2-505(2)(c) provides that a creditor cannot reach an irrevocable trust solely because a non-settlor trustee or advisor may reimburse the grantor for income tax on trust income. If a SLAT includes a reimbursement power, the estate tax effect has to be reviewed as well.
The reciprocal trust doctrine
If both spouses create SLATs, the IRS may "uncross" them. In United States v. Estate of Grace, 395 U.S. 316 (1969), the Supreme Court held that the doctrine applies when the trusts are interrelated and leave each person in approximately the same economic position as if each had created a trust for himself or herself. The Court said it does not need proof of a tax-avoidance motive. Mirror-image SLATs are the highest-risk setup.
Differences reduce the risk but do not remove it. Practitioners vary the assets, funding dates, trustees, distribution standards and remainder beneficiaries so the trusts are not interrelated. Many couples fund only one SLAT.
Risks to understand before you sign
If the beneficiary spouse dies first, you lose your indirect access to the trust and the assets continue for the children or other beneficiaries. Common ways to reduce the effect include keeping enough assets outside the trust, life insurance on the beneficiary spouse, a limited power of appointment for the spouse, and flexible distribution standards. You may also continue to owe income tax on trust income as the grantor, depending on how the trust is drafted.
If you divorce, the trust is still irrevocable. Your former spouse can remain a beneficiary unless the trust provides otherwise. Under the spousal unity rule in IRC § 672(e), you can remain taxed on the trust's income even though you no longer have indirect access. Whether the former spouse's interest ends on divorce is a drafting decision we discuss before you sign.
If you depend on the trust or have an understanding with the trustee that assets will flow back to you, the IRS can argue the assets belong in your estate under IRC § 2036(a)(1). Keep enough outside assets, use an independent trustee, and treat the trust as the real gift it is.
The basis trade-off
Assets you give to a SLAT keep your income tax basis (carryover basis under IRC § 1015). They do not receive the step-up to fair market value that assets held at death receive under IRC § 1014. If the assets have large built-in gains, your heirs could owe capital gains tax on a sale that the estate tax savings do not offset. Cash and assets with high basis or high expected growth are often better choices. Coordinate the funding with your CPA before you transfer anything.
Build the core plan first
A SLAT sits on top of a core estate plan, not in place of one. Most couples should have a revocable living trust, pour-over will, powers of attorney and health care directives in place first. See our pages on advanced estate planning and asset protection and legacy planning for related strategies.
What it costs
The flat attorney fee for a SLAT is $5,000. It does not include the core estate plan, which we recommend completing first if you do not have one. See our pricing page.
Frequently asked questions
What is a SLAT? A SLAT is an irrevocable trust one spouse funds for the other spouse's benefit. The gift uses the grantor's exemption, the assets are generally removed from the grantor's taxable estate, and the beneficiary spouse can receive distributions from an independent trustee.
Does my family need a SLAT to reduce estate taxes? Not necessarily. Utah has no estate tax, and the federal exemption is large. Many couples can use portability and a revocable trust plan instead. A SLAT tends to matter when combined estates may exceed the federal exemption now or later.
Can both spouses create SLATs? Yes, but mirror-image trusts risk being "uncrossed" under the reciprocal trust doctrine. The trusts should differ in funding, assets, trustees, distribution standards or remainder beneficiaries, and even then the risk is reduced, not removed.
What happens if the beneficiary spouse dies first? Your indirect access ends and the assets pass under the trust to the remainder beneficiaries. Keeping enough outside assets, adding life insurance and building flexibility into the trust can reduce the effect.
What happens if we divorce? The trust stays irrevocable. Whether your former spouse remains a beneficiary depends on how the trust is drafted, and you may continue to owe the income tax on trust income. We address this before you sign.
Talk it through first
If you are weighing a SLAT, we are happy to walk through the numbers and the risks with you and your CPA. Book a free consultation with Legacy Peak Estate Planning Law. We serve clients throughout Utah from our Draper and Kaysville offices.
This page is general information, not legal or tax advice, and it does not create an attorney-client relationship.