The SLAT
"The $15M estate exemption is now permanent under OBBBA ($30M per couple) — but it only freezes appreciation if you act. A SLAT lets you give it away AND keep indirect access through your spouse."
The 60-second pitch
The 2017 Tax Cuts and Jobs Act doubled the federal estate & gift tax exemption, and the One Big Beautiful Bill Act made it permanent. For 2026 it sits at $15 million per person ($30M for a married couple), indexed for inflation from 2027. The old January 1, 2026 sunset was repealed.
That means a couple with a $40M estate can move up to $30M out of their estate forever — and, just as importantly, all of that gift's future appreciation grows outside the estate. The IRS confirmed in Reg §20.2010-1(c) that there is no "clawback" — gifts made under the high exemption stay shielded even if the exemption is ever reduced.
The problem with giving away $15M? You might need to live on it. Enter the Spousal Lifetime Access Trust (SLAT): an irrevocable trust funded by one spouse for the benefit of the other. The gift is complete — it's out of your estate forever — but your spouse remains a discretionary beneficiary. As long as you stay married and your spouse is alive, the family still has access to those assets through your spouse.
It's the closest thing to having your cake and eating it too that exists in the Internal Revenue Code — and the sooner you fund it, the more appreciation escapes your estate.
Real-world example
The setup. David sold his SaaS company in 2023 for $34M post-tax. Combined with Rachel's stock portfolio, the family estate is $42M. They have 2 kids (ages 14, 11). With the combined $30M exemption, ~$12M is already exposed at 40% = $4.8M of estate tax today — and that exposure only grows as the portfolio appreciates inside the estate.
The move. David engages an estate attorney ($15K). He establishes an irrevocable SLAT with Rachel as primary beneficiary and the kids as remainder beneficiaries. He gifts $15M of marketable securities from his post-sale brokerage into the trust.
The mechanics. The trust is a non-grantor SLAT for estate tax (out of David's estate immediately) AND a grantor trust for income tax (David pays the trust's income tax personally — itself a further estate-shrinking move under Rev. Rul. 2004-64). Rachel can request distributions for "health, education, maintenance, and support" — the HEMS standard — so the family can tap the trust if needed.
The Form 709 hit. David files Form 709 reporting a $15M taxable gift. It uses his entire lifetime exemption. $0 gift tax due. Per Treasury Reg §20.2010-1(c), the exemption he uses is locked in even if Congress reduces it later — there is no clawback.
The result. $15M plus all future appreciation is now outside David's taxable estate. At 40%, on a 20-year horizon with even modest appreciation, this saves the family $6M+ in federal estate tax. Every year he waits, more of that appreciation accrues inside his estate instead.
The step-by-step checklist
- Confirm your estate is above the exemption. If your estate is under ~$30M married, you probably don't need a SLAT. Above that, the math gets compelling fast.
- Engage an estate attorney early. SLATs take 4-8 weeks to draft, fund, and execute. There is no longer a year-end cliff, but the sooner you fund, the more appreciation grows outside your estate.
- Identify the funding asset. Marketable securities, business interests, real estate, life insurance. Prefer assets likely to appreciate — appreciation post-gift compounds outside your estate.
- Get a qualified appraisal for non-cash gifts. Closely-held stock, real estate, or LLC interests need a defensible FMV. Use an accredited appraiser — the IRS challenges valuation aggressively.
- Pick the beneficiary spouse. The non-donor spouse becomes the primary beneficiary. The kids (and grandkids) are remainder beneficiaries.
- Pick a trustee. NOT the donor spouse (would unwind the gift). Often the beneficiary spouse can serve as a co-trustee for distributions limited to HEMS — but a non-family corporate trustee is cleaner under audit.
- Structure as a grantor trust for income tax. Under §671-679, the donor pays the trust's income tax — a tax-free additional transfer to the beneficiaries. (See our IDGT page for more on grantor trust mechanics.)
- Fund the trust to start the appreciation clock. Wire the assets to the trust account. The date of transfer fixes the value of the completed gift — everything that grows afterward grows outside your estate.
- File Form 709 by April 15 of the following year (Oct 15 with extension). Report the gift on Schedule A. Use up the lifetime exemption. Allocate GST exemption if the trust has multi-generational beneficiaries.
- If both spouses want to gift, use TWO different SLATs. NOT mirror-image — the IRS will collapse them under the reciprocal trust doctrine if the trusts are too similar. Use different trustees, different terms, different funding dates, different distribution standards.
- Be aware of "what if we divorce" risk. Loss of the beneficiary spouse = loss of family access. Some SLATs include a "floating spouse" clause — beneficiary defined as "spouse of grantor" rather than naming Rachel specifically — but this creates other complications.
- Carry life insurance on the donor spouse. If David dies first and Rachel was relying on indirect access through the trust, she needs distributions plus any other separate assets. Layer in ILIT-owned term life to bridge the gap.
- Don't reciprocate the same year. If both spouses fund SLATs, stagger by at least 6-12 months and vary terms substantially to avoid the reciprocal trust doctrine (U.S. v. Estate of Grace, 1969).
IRS code & authority
- §2010 The unified credit. 2026 basic exclusion amount = $15M per individual ($30M married), made permanent by OBBBA and indexed for inflation from 2027. The TCJA sunset that would have cut it on January 1, 2026 was repealed.
- Reg §20.2010-1(c) The "anti-clawback" regulation. Gifts made under the higher exemption stay protected even if the exemption later drops. Confirmed by IRS in 2019 — this is what makes "use it or lose it" real.
- §2036, §2038 Retained-interest rules. If the donor retains the right to enjoy, possess, or revoke the trust, the assets are pulled back into the estate. SLATs avoid these by making the SPOUSE (not the donor) the beneficiary.
- §671-679 Grantor trust rules. Drafted intentionally to make the donor pay the income tax (a tax-free gift to beneficiaries). Note: §677(a) treats the trust as a grantor trust because income can be applied for the donor's spouse.
- U.S. v. Estate of Grace, 395 U.S. 316 (1969) The reciprocal trust doctrine. If both spouses fund mirror-image SLATs for each other, the IRS uncrosses them and pulls each trust back into the funder's estate.
- §2503 Gift tax — annual exclusion + lifetime exemption framework. SLAT funding is a completed gift that uses lifetime exemption.
- §2632 Generation-skipping transfer (GST) tax. Allocate GST exemption (also $15M in 2026) on Form 709 if the SLAT has grandchild remainder beneficiaries.
- Rev. Rul. 2004-64 Confirms that a grantor's payment of grantor-trust income tax is NOT an additional gift. Lets the donor effectively transfer the income-tax burden to themselves without using more exemption.
- TCJA §11061 (P.L. 115-97) The 2017 law that doubled the exemption. Its Dec 31, 2025 sunset was repealed by OBBBA (P.L. 119-21), which made the $15M exemption permanent.
Audit risk flags
- Reciprocal trust doctrine collapse. If both spouses fund SLATs that look like mirror images, the IRS uncrosses them and both trusts get pulled back into each donor's estate. Defense: Different trustees, different terms (e.g., one HEMS, one broader discretion), different funding dates by at least 6 months, different beneficiary classes.
- Divorce ends indirect access. If you and your spouse divorce, the beneficiary ex-spouse may still control the trust assets — and you have no recourse. Defense: "Floating spouse" clause OR include the donor's children as additional beneficiaries OR negotiate the SLAT in a prenup.
- Beneficiary spouse dies first. Indirect access is gone. Trust continues for the kids as remainder beneficiaries. Defense: Term life insurance on the beneficiary spouse. Or fund two SLATs (one each spouse) so you always have one alive.
- Improper trustee. If the donor spouse serves as trustee with discretionary distribution power, §2036 retained interest pulls the trust back into the estate. Defense: Independent trustee, OR co-trustee limited strictly to HEMS distributions.
- Valuation challenge on hard-to-value assets. Gifting closely-held LLC interests with discounts? The IRS routinely challenges discounts above 30%. Defense: Qualified appraisal from an accredited business-valuation firm + adequate disclosure on Form 709 to start the 3-year statute of limitations.
- Step transaction doctrine. Don't gift, hold for 5 days, then transfer to your spouse personally. Looks like you got the money back. Defense: No round-trip transactions. Don't take "loans" from the SLAT personally.
- Failure to allocate GST exemption. If the SLAT will benefit grandchildren and you don't allocate GST on Form 709, distributions to grandkids may trigger 40% GST tax later. Defense: Affirmative GST allocation on the Form 709 reporting the gift.
- Late funding. Wires on December 30 that don't settle until January 4 missed the deadline. Defense: Fund by mid-December. Cash settles next day. ACH may take 3 days. Use Fedwire for last-minute funding.
When NOT to do this
- Your estate is under ~$30M married. You're under the combined $30M exemption, so there's no federal estate tax to avoid. You probably don't need a SLAT. Annual exclusion gifts may be enough.
- You're not confident the marriage will last 10+ years. A SLAT is irrevocable. Divorce can leave the donor with no access to the trust and the ex-spouse still benefiting. If marriage is shaky, look at other vehicles.
- You can't afford to live on the rest. If gifting $15M leaves you with $3M to live on at age 60, you've under-funded retirement. Run the cash flow before signing the deed.
- You're already over the exemption with prior gifts. If you've used your $15M of lifetime exemption already, a new gift is fully taxable at 40%. The SLAT structure doesn't matter — you owe the tax.
- You may need the assets back. A SLAT is irrevocable. The estate-tax landscape can still shift politically. If moving $15M permanently out of your reach would jeopardize your own security, keep documents pre-drafted but don't over-fund.
- The asset you'd fund with is your business that you still actively run. Gifting your operating business to a SLAT loses you control. Use a non-voting class of stock or recapitalize before gifting.
- You're in a state with a state-level estate tax. NY, MA, CT, OR, etc. all have lower thresholds. SLAT structure helps, but state planning needs its own analysis.
Freeze appreciation outside your estate
PilePilot's Books agent tracks your asset values in real time, flags when you cross estate-exemption thresholds, and tags trust funding transactions for your Form 709. Built for small businesses who's run SLATs through audit. The sooner you fund, the more growth escapes your estate — start the conversation now.
Start your free trial →No credit card. Your data is private and isolated — export or delete it anytime.
Disclaimer. This page is educational and not tax advice. SLATs are complex irrevocable instruments with material lifetime consequences — divorce risk, reciprocal trust doctrine, retained-interest exposure, GST allocation. Before funding a SLAT, work with both an estate attorney AND a tax professional experienced in high-net-worth gifting. OBBBA (P.L. 119-21) made the $15M exemption permanent as of this writing, though Congress could modify it in the future; track legislative developments. All dollar examples are illustrative.