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Spousal Lifetime Access Trust (SLAT)

An irrevocable life insurance trust (ILIT) is one of the most efficient estate planning tools to transfer wealth to your loved ones. Most notably, assets owned in an ILIT and all appreciation on those assets will not be subject to estate taxes. In addition to estate tax exclusion, the irrevocable trust structure offers enhanced privacy, creditor protection, and control over the timing and manner of distributions to beneficiaries.

Although a traditional ILIT offers many benefits, a common concern is that gifts made to the trust are irrevocable, meaning that you cannot access these assets. This includes any accumulation of life insurance policy cash values. This loss of control can become problematic if circumstances change.

A simple way to increase flexibility and access in irrevocable trusts


  • What if your financial situation changes?

  • What if your goals change?

  • What if tax laws change?

SLAT basics

A spousal lifetime access trust (SLAT) is a variation on a traditional ILIT. A SLAT gives the trustee the ability to make distributions to your spouse during their lifetime, even though the trust may ultimately be created to benefit children, grandchildren, and other beneficiaries. For example, a SLAT allows the flexibility to be drafted to provide distributions to your spouse for health, education, maintenance or support (HEMS). Or, it may also be drafted more broadly to give an independent trustee absolute discretions to make distribution of income and/or principal. Funding a SLAT with lifetime gifts to purchase permanent life insurance in the same manner as a traditional ILIT can be an effective way to protect legacies, provide liquidity, and create estate equalization, while at the same time providing a mechanism for indirect access to trust assets via the spousal access provisions.

How It Works

Step 1

Your attorney drafts an ILIT with spousal access provisions (a SLAT). You are the SLAT’s creator (the “grantor”). Your spouse (the “non-grantor spouse”) can be designated as one of the SLAT’s beneficiaries.

Step 2

You fund the SLAT by making gifts to the trust. You can choose to fund the trust by:

  • making annual exclusion gifts up to $15,000 per trust beneficiary each year without having to pay gift taxes. [1]

  • deciding to make larger gifts to the trust using some of your available lifetime exemption ($11.7M in 2021). [2]

Step 3

The SLAT’s trustee purchases a life insurance policy on your life. The gifts to the trust will be used to pay the insurance premiums. The policy’s cash value grows inside the trust on a tax-favored basis.

Step 4

During your lifetime, the trustee may make tax-free distributions to your spouse from the policy’s cash value (if available) or from other trust assets as permitted by the trust terms. A SLAT allows for drafting flexibility to provide your spouse distributions for HEMS, or can provide more broad distributions of income and/or principal at the discretion of an independent trustee.

Step 5

At your death, the trust will receive the life insurance death benefit free from both income and estate taxes to benefit trust beneficiaries.

Key Benefits

A spousal access trust with life insurance can offer you several benefits:

  • Tax-free death benefit provided to the SLAT and distributed to heirs.

  • Two layers of creditor protection: both from your creditors and from creditors of your beneficiaries (third parties, divorcing spouses, etc.). The trust can also include “spendthrift” language to protect a beneficiary from reckless spending and preserve trust assets.

  • Enhanced privacy via the trust structure and greater control over the timing and manner of trust distributions (e.g., at certain ages and/or for certain purposes).

  • Potential increase in the amount of money left for your heirs through the use of gifts to purchase life insurance.

  • Greater flexibility and access through SLAT provisions allowing trust assets that can be distributed to your spouse.

  • The option to give a trustee the ability to make trust distributions to provide supplemental retirement income for your spouse via policy loans and withdrawals.


A spousal access trust can help provide flexibility for your estate plan by allowing your spouse access to trust assets including policy cash values, while keeping the death benefit out of your estate and the hands of creditors. Even if the trust is intended to be primarily for the benefit of beneficiaries/heirs, the SLAT allows the trustee to make distributions to your spouse, providing much needed flexibility should unforeseen circumstances require a distribution. For more information, please schedule a time to talk with us.

[1] $15,000 is the annual exclusion amount in 2021. Annual exclusion gifts are indexed annually for inflation.

[2] The Tax Cuts and Jobs Act of 2017 temporarily increased the lifetime exemption from $5M (indexed for inflation) to $11.7M (indexed for inflation). The exemption is scheduled to revert to a $5M exemption (indexed for inflation) in 2026.

Trusts should be drafted by an attorney familiar with such matters in order to take into account income and estate tax laws (including the generation-skipping tax). Failure to do so could result in adverse tax treatment of trust proceeds. There can be costs associated with drafting a trust.

Loans and withdrawals will reduce the death benefit and the cash surrender value, and may cause the policy to lapse. Lapse or surrender of a policy with a loan may cause the recognition of taxable income. Withdrawals in excess of the cost basis (premiums paid) will be subject to tax and certain withdrawals within the first 15 years may be subject to recapture tax. Additionally, policies classified as modified endowment contracts may be subject to tax when a loan or withdrawal is made. A federal tax penalty of 10% may also apply if the loan or withdrawal is taken prior to age 59 1/2. Withdrawals are available after the first policy year.

Life insurance death benefit proceeds are generally excludable from the beneficiary’s gross income for income tax purposes. There are a few exceptions such as when a life insurance policy has been transferred for valuable consideration.

This material does not constitute tax, legal or accounting advice. It cannot be used by any taxpayer for the purpose of avoiding any IRS penalty. It was written to support the marketing of the transactions or topics it addresses.


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