Couples with assets valued between $20 million and as high as $50 million typically are reluctant to give away $5 million or $10 million, in case they someday need the gifted assets. A spousal lifetime access trust (SLAT), coupled with the purchase by the SLAT of some life insurance, may provide the best of both worlds: a completed gift, removal of trust assets from a couples’ gross estate and a tax-favored leveraged death benefit, all while allowing a beneficiary spouse the flexibility of retaining tax-efficient access to the policy cash value, if needed in the future.
The trouble with any gifting strategy, in Cincinnati or elsewhere, is that any gift is gone once given. While given assets don’t count against your estate, they also aren’t there if you need them later. This can be a legitimate concern, whether you have a little or a lot.
With the longer lifespans we now enjoy and the expensive healthcare costs we now face, one strategy is to use gifts to purchase life insurance as a gift for your heirs, and to do so with a trust arrangement known as a SLAT.
A SLAT, or “Spousal Lifetime Access Trust” enjoyed the spotlight in a recent WealthManagement.com article titled “SLATs and Life Insurance: Have Your Cake and Eat it Too.”
Now, knowing how to have your cake and eat it too can require a complex bit of planning. However, done right, such planning can be powerful. Problem: when life insurance is owned by an individual it ends up counting towards their estate value by virtue of such “incidents of ownership.” A Spousal Lifetime Access Trust that owns a life insurance policy (a tactic normally seen in traditional Irrevocable Life Insurance Trusts) will allow access on the part of your spouse during their lifetime while also funding the policy for your heirs. If this sounds too good to be true, then it just might be if all of the i’s and t’s are not dotted and crossed properly.
To learn more about this temperamental and advanced, if potent, device, review the original article and consult with your estate planning attorney.
If you have any questions about any of the information contained in this blog, see the estate planning website of Cincinnati attorney, David H. Lefton, or contact him at 513-399-PLAN (7526) or by email at firstname.lastname@example.org.
Reference: Wealth Management.com (October 17, 2012) “SLATs and Life Insurance: Have Your Cake and Eat it Too”