A South Dakota Spousal Lifetime Access Trust (“SLAT”) is an effective way to utilize ones $11.7 million. It is a popular planning tool used among married couples who wish to reduce estate taxes and protect their assets from creditors while still retaining lifetime access. In addition, a South Dakota SLAT has the flexibility to adapt to uncertainty in an ever-changing tax landscape while utilizing South Dakota’s top rated asset protection, tax, and trust laws.
The SLAT is an irrevocable trust created by one spouse (“grantor spouse”) during his or her lifetime for the benefit of the other spouse (“beneficiary spouse”) and/or other beneficiaries, such as children, grandchildren, or other remote family members, and can be structured to meet the unique needs of each family. The grantor spouse uses his or her remaining gift tax exemption to transfer assets to the SLAT and typically designates his or her spouse as a lifetime beneficiary. The key benefit of a SLAT is that, by naming his or her spouse as a lifetime beneficiary, the grantor spouse retains indirect access to the trust assets. Technically, a SLAT is designed to remove trust assets from both the grantor and beneficiary spouse’s estate.
The SLAT can be structured to allow only the beneficiary spouse access to the funds during his or her lifetime or it can benefit both the beneficiary spouse and other family members either during life or after the beneficiary spouse’s death. When the SLAT continues in perpetuity, it is known as a “Dynasty SLAT.” In other words, a Dynasty Trust in an unlimited duration state, such as South Dakota, can endure for the longest possible time and circumvent additional death taxes on the trust assets at each generation.
In addition, a family may consider establishing a Spousal Lifetime Access Non-Grantor Trust (“SLANT”). A SLANT offers similar planning and asset protection to the SLAT, but can also achieve other tax benefits such as state income tax savings.