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Being happily married, healthy and wealthy is one of life’s great trifectas. There’s a tax perk that can make it even sweeter.
Among financial advisors with those clients, a wealth-planning strategy is surging in popularity as lawmakers debate tax increases to fund the Biden administration’s social spending and climate agendas. Known as a spousal lifetime access trust, or SLAT, the maneuver has a major benefit for high net worth couples: The ability to whisk assets out of their taxable estates while still benefiting from them during retirement.
“It’s become the planning acronym du jour,” said Martin Shenkman, an estate planning lawyer based in Fort Lee, New Jersey.
A SLAT isn’t a simple add-water-and-mix move. It’s easy to get the requirements wrong, void your arrangement and end up owing the IRS millions of dollars. But when done right, some estate planners call it the perfect tax break for the perfect couple with the perfect lifestyle.
“It’s ‘have your cake and eat it, too’,” said Kristin Shirahama, a trusts and estates lawyer focused on tax at law firm Bowditch & Dewey in Framingham, Massachusetts.
The trusts are a form of so-called grantor trusts, in which a donor, or grantor, transfers assets but retains a degree of control. Grantor trusts appeared last fall to be on the chopping block when the House of Representatives released its first version of tax-and-spending legislation to finance President Joe Biden’s Build Back Better plan.
Their proposed curb is no longer on the table, at least for now. The Senate Finance Committee, now working on its own changes to the Build Back Better bill passed by the House last month, didn’t mention any proposed restrictions on Dec. 11 when it released 1,180 pages of “updated text” to the bill. (That document also didn’t include a proposal for a billionaire’s tax or any mention of relaxing the $10,000 SALT cap on deducting state and local...