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Could a SLAT help protect your wealth from estate taxes?

On Behalf of | Mar 12, 2021 | Estate Planning

Some Maryland residents have a substantial estate because they worked hard, make smart investments or generally managed their money well. Though amassing considerable wealth certainly feels like an achievement, it can seem troublesome knowing that their wealth will be subjected to estate taxes because it exceeds the exemption limit. Fortunately, there are options for preserving that wealth and avoiding estate taxes, or at least a portion of them.

When it comes to managing wealth, many individuals are no stranger to trusts. Trusts can help protect assets in a number of ways while also giving the grantor the ability to control how those assets are used. If a person is married and is interested in utilizing the current lifetime federal estate tax exemption to avoid those taxes, a spousal lifetime access trust may help.

Using a SLAT could work toward preserving wealth in the following ways:

  • It is an irrevocable trust that can remove the exempted amount of funds from the taxable estate.
  • Though called a spousal trust, children can also be named as beneficiaries of the trust.
  • The spouse named to the trust can access the funds during his or her lifetime, which means the grantor could still benefit from those funds during his or her life as well, provided the named spouse is still living.

Some downsides to using a SLAT to avoid estate taxes do exist, so it is important that Maryland residents considering this option also look closely at the pros and cons. It may be worthwhile to make contingencies for possible divorce and to remember that the grantor could lose access to the assets if the spouse named as beneficiary passes away. As a result, it is wise to work with attorneys experienced in creating trusts who could help individuals fully understand their options.