What is a Colorado Spousal Lifetime Access Trust?

Married couples often wonder if there are specific ways to protect their assets that apply specifically to them. One of these lesser-known estate planning options is the creation of a spousal lifetime access trust (SLAT), which is utilized to transfer assets outside of the estate. Using a SLAT can protect assets from the federal estate tax but ensure the spouse will be able to benefit from the gift after the other spouse passes away. Below is information on SLATs, their purpose, and how to take advantage before the current exemption limit is lowered.

What Is SLAT and How Does it Work?

A SLAT is an irrevocable trust where one spouse places assets in a trust for the benefit of the other spouse. Because the trust is irrevocable, the action cannot be undone and the spouse who created the trust can no longer access the assets. However, this also means that the asset is considered removed from their estate and cannot count for estate tax purposes anymore. For married couples that have an estate of over $24.12 million, they will have to pay an estate tax after they have passed away. Utilizing a SLAT is one way to reduce the overall total of the estate and avoid the estate tax.

When Will the Exemption Limit Be Reduced?

The current provision that exempts married couples with estates over $24.12 million from paying the federal estate tax will be reduced in 2026. By creating—and funding—a SLAT prior to the exemption being lowered, the couple will be able to transfer up to $24.12 million into the SLAT without having to worry about tax implications. However, after the exclusion limit is reduced to $6 million in 2026, couples will be unable to transfer more than $6 million into a SLAT without having to pay taxes. However, married couples that take advantage of the current higher exemption will not be adversely affected when the limit is reduced in the future—meaning, there will be no impact on their already funded SLATS. Additionally, Congress has the ability to lower the exemption limit even sooner, so it is important for interested couples to begin the process of funding a SLAT as soon as possible.

Because there are nuanced decisions couples should make when creating a SLAT—such as which assets to gift and how to start the process—individuals interested in a SLAT should contact an experienced estate planning attorney as soon as possible to learn more about the process.

Contact a Colorado Estate Planning Attorney

If you or a loved one is interested in creating a spousal lifetime access trust, contact the Braverman Law Group, LLC. For many years, the estate planning attorneys at the Braverman Law Group have provided advice to Coloradans on estate plans, trusts, asset protection strategies, and more. Our goal is to make sure you understand your estate planning options, so you can make the choices that work best for you and your family. For a free, no-obligation consultation with one of our estate planning attorneys, call us today at (303) 800-1588.