Once your net worth crosses certain thresholds, estate planning becomes more complex due to federal rules, New York's estate tax system, and logistical challenges—especially if you own property in both New York and New Jersey. A Spousal Lifetime Access Trust (SLAT) is a popular tool for high-net-worth married couples, as it can move significant wealth—plus future appreciation—out of your taxable estate while allowing your beneficiary spouse to receive distributions from the trust.
However, SLATs require careful execution, particularly with the federal tax exemption scheduled to decrease after 2025 and New York's estate tax cliff and gift add-back timing concerns. For NY/NJ families, it is critical to have counsel licensed in both states who can navigate these complexities within a single plan. NY Wills & Estates, with offices in Manhattan and Hackensack, specializes exclusively in estate planning across both jurisdictions.
Three Things Worth Understanding First
Before diving into the mechanics, there are three essentials that should be crystal clear before anyone starts drafting documents. Keep these in mind, and you'll make sharper decisions while sidestepping the most common SLAT regrets.
First, a SLAT is fundamentally a tax-and-appreciation strategy. You're moving assets—and their future growth—out of your taxable estate while today's transfer rules remain generous. That's precisely why conversations about the post-2025 federal exemption reduction are happening everywhere right now. Here's something people often miss: the "gift date" that matters[2] is the day the asset transfer is actually completed, not the day you sign the trust document.
Second, your flexibility flows through your spouse—not directly to you. A SLAT can feel reassuring because your beneficiary spouse can receive distributions from the trust. But your access is indirect. If your marriage isn't rock-solid, if you disagree about spending, or if divorce seems like a realistic possibility, that indirect access could evaporate. Smart drafting can limit the fallout, but it can't eliminate relationship risk entirely.
Third, in NY/NJ, execution and documentation matter as much as strategy. New York's estate tax cliff and its three-year gift add-back rule (which has applied to certain gifts made within three years of death, though the rule's scope and duration have seen legislative changes) can affect both the math and timing of your plan. New Jersey eliminated its estate tax for deaths on or after January 1, 2018[1], but still imposes an inheritance tax on transfers to certain beneficiaries. NJ real estate held in a trust also comes with specific title and recording requirements. And if both spouses are creating SLATs, you must address the reciprocal trust doctrine with real, documented differences. These aren't technicalities—they're what makes the plan hold up under IRS scrutiny.
If you want a clear starting point, here it is: get a date-stamped exemption snapshot (federal and state), confirm you have transferable assets you can fund cleanly, and insist on a written funding plan with responsibilities and deadlines assigned.
Is a SLAT Actually Right for You?
Before investing time and money in drafting, you can usually reach a "likely yes," "likely no," or "need more information" answer with a quick self-assessment. A SLAT typically makes sense when three conditions come together.
Expert Insight
One thing that surprises many couples I meet is just how adaptable a Spousal Lifetime Access Trust (SLAT) can be—yet how easily its benefits can slip away without careful planning. I’ve seen how the appeal of tax savings with built-in flexibility draws interest, especially from families juggling assets across New York and New Jersey. But I always remind clients that a SLAT is only as good as its execution; details like timing, asset choice, and trust terms can make or break the whole plan.
In recent years, the shifting landscape of estate tax exemptions and state-specific rules has made these trusts more relevant—and potentially more risky—than ever before. At NY Wills & Estates, we see first-hand how important it is to approach SLATs with a deep understanding of family dynamics and local law. To truly benefit, families need clear goals, open communication, and the right professional guidance—because in estate planning, it’s always the fine print that matters most.
Estate tax risk is real. Your projected estate (including life insurance and real estate) approaches or exceeds the federal estate tax exemption ($13.61M per individual in 2024), or it's substantial enough that New York's $6.94 million exemption (2024)[4] could become problematic.
Your marriage is stable. The access you retain flows through your beneficiary spouse—that only works if you're genuinely comfortable relying on their judgment and the relationship's long-term stability.
You have suitable assets ready to fund. SLATs work best with assets that can be cleanly transferred and reliably valued: cash, marketable securities, and real estate with clear title.
SLATs aren't for everyone. If you're comfortably below taxable thresholds, if the marriage is under strain, or if most of your wealth is locked up in illiquid or difficult-to-transfer interests, a SLAT can create unintended pressure—administrative complexity, liquidity headaches, and sometimes family disputes.
If you do schedule a meeting with an attorney, you'll get more value—and waste fewer billable hours—by coming prepared. See the "What to Bring to Your Attorney Meeting" section below for a complete checklist of documents. Already received draft trust paperwork? Bring that too—it helps attorneys catch structural issues early.
A specialized estate planning firm can often tell you quickly whether a SLAT is the right tool, or whether you'd be better served by a simpler estate planning foundation—updated wills, revocable trusts, and coordinated beneficiary designations—before venturing into advanced irrevocable trust territory.
How SLATs Work (And Why the Clock Is Ticking)
A SLAT is an irrevocable trust created by one spouse (the donor spouse) for the benefit of the other spouse (the beneficiary spouse). Children or other family members are often included as remainder beneficiaries. When properly designed and funded, the donor spouse makes a completed gift that removes the transferred assets—and their future growth—from the donor's taxable estate. Meanwhile, the beneficiary spouse can receive distributions if the trust terms allow, creating a practical safety valve if the couple needs access down the road.
Why the 2026 deadline dominates the conversation: The federal estate and gift tax exemption currently sits at a historic high of $13.61M per individual in 2024. Under current law, after December 31, 2025, that exemption amount is scheduled to drop to roughly half the current amount (adjusted for inflation) as key provisions of the Tax Cuts and Jobs Act sunset[7]. Congress could change the law, but the scheduled reduction is what's driving tax planning decisions today. The practical rule is straightforward: the exemption you use gets locked in when the gift is completed. That's why timing matters—especially when funding involves steps that can delay completion, like account retitling, deed recording, business transfer approvals, or valuations.
Why New York and New Jersey change the calculation: New York has its own estate tax with a lower exemption and a notorious cliff: if your taxable estate exceeds the NY exemption by more than 5%, the exemption vanishes entirely and tax applies to the full amount—not just the overage. New York has also imposed a three-year gift add-back rule for certain gifts made within three years of death, which can reduce or eliminate the expected NY estate tax benefit if gifts happen too late. The scope and duration of this rule have been subject to legislative changes, so confirm current applicability with your attorney.
New Jersey eliminated its state estate tax for deaths on or after January 1, 2018, but still imposes an inheritance tax on transfers to certain non-exempt beneficiaries at rates up to 16%. NJ also has practical, transaction-level issues when trusts own NJ real estate—title, recording, and transfer tax documentation—that can affect timing even when no estate tax is owed. Own property in both states? Filing requirements, administration, and transfer steps all become more complex.
Federal, New York, and New Jersey Rules at a Glance
What this means in practice: In New York, a federally sound plan can still underperform if gifts are made too close to death or if the estate lands in cliff territory. In New Jersey, the bigger surprise is often inheritance tax—based not on estate size, but on which beneficiaries receive assets.
What a SLAT Can Look Like in Practice
A simplified example helps illustrate the potential tax benefits. Imagine a donor spouse transfers $5,000,000 to a SLAT in July 2024. If the trust assets grow at 6% annually for ten years, the trust could be worth approximately $8,954,000—and all that growth would be outside the donor spouse's taxable estate, passing tax-free to future generations.
You can use the same framework to test your own scenario: pick a funding date, gift amount, and reasonable growth assumption. Your attorney and CPA can then refine it with realistic figures for your asset mix, expected sales, income taxes, and state-specific effects.
The real-world lesson: The longer a SLAT remains in place, the more value shifts outside the taxable estate. But the benefit is maximized only when timing, asset selection, and state rules are handled deliberately.
The SLAT Setup Process: What to Expect
Most SLAT implementations follow a predictable sequence. Knowing the flow helps you spot where mistakes tend to happen—and understand what should occur in the first year after funding.
The process typically begins with design and strategy: you and your attorney decide who benefits, how distributions work, who serves as trustee (including whether to use an independent trustee), and whether to include features like a trust protector. If both spouses want SLATs, the plan must address reciprocal trust risk from day one.
Next comes drafting, where the trust is customized with distribution standards and administrative powers that accomplish your goals without creating provisions that could pull assets back into the estate for estate tax purposes. After signing with proper formalities (witnessing and notarization as required, with governing law chosen intentionally), the critical phase is funding—the step people most often underestimate.
The plan only works if you actually transfer assets into the SLAT: new account registrations, updated deeds, assignments of interests, and confirmation that the trust is the legal owner. Your "gift date[11]" for planning purposes is when the transfer is completed, not when the document was signed.
Even when a SLAT is drafted as a grantor trust for income tax purposes, many institutions require an EIN to open accounts and properly title assets. Tax reporting follows: Form 709 is typically filed for the year of the taxable gift, and appraisals may be needed for real estate or business interests. Finally, ongoing administration—especially in the first year—means separate accounts, clean bookkeeping, documented trustee decisions, and properly recorded distributions.
Clear role assignments prevent gaps: The grantor/donor spouse approves the funding strategy and signs transfer documents. The trustee opens trust accounts, receives and manages SLAT assets, and documents distributions. Your attorney designs the trust and oversees legal compliance. Your CPA or tax advisor typically prepares the gift tax return and coordinates valuation reporting. A strong SLAT process makes these responsibilities explicit in writing.
The ACTS Framework: Evaluating Whether a SLAT Makes Sense
If you're close to a decision, the best way to pressure-test a SLAT is to walk through four categories: Assets, Compatibility, Terms, and State Law. Think of ACTS as a practical filter. If one area is shaky, you either fix it before funding or choose a different tool.
The bottom line: Married couples with concerns in any ACTS category can still do excellent planning—the SLAT may just need redesigning, or a different strategy may prove safer.
Are Your Assets a Good Fit?
This is a line-by-line inventory exercise, not a rough guess. You need to confirm ownership (who legally owns it), transferability (can it move into a trust without breaking a contract), liquidity (can the trust pay expenses), and valuation (can you support the number you report).
Your attorney will typically flag complications early: jointly owned property that can't be transferred without a larger retitling plan, illiquid holdings that create cash-flow problems inside the trust, and hard-to-value assets (like certain business interests) that require professional appraisal to reduce audit risk.
Does a SLAT Fit Your Family Dynamics?
This is where the SLAT either feels like a smart safety valve or a source of stress. A SLAT works best when both spouses are aligned on long-term financial goals and you're comfortable that access will be managed responsibly through the beneficiary spouse.
Red flags include serious disagreements about spending or control, a spouse living out of state (or abroad) in a way that complicates administration, and beneficiaries with special needs who may require additional planning features. If any of these apply, the answer isn't necessarily "don't do a SLAT"—it may be "adjust the structure" or "use a different tool."
Are the Trust Terms Properly Drafted?
This is the technical heart of SLAT planning: the trust must accomplish your goals without creating IRS inclusion problems or practical control disputes. Precision matters in trustee powers, distribution standards, and any provisions that could look like the donor spouse retained too much control.
Experienced counsel can also prevent avoidable scrutiny—especially when spouses are considering two SLATs (reciprocal trust risk) or when the plan needs flexibility features (like a trust protector) without undermining the tax result.
Have State-Specific Rules Been Addressed?
State law isn't a footnote in NY/NJ SLAT planning. New York's estate tax cliff and add-back timing can change the payoff of gifting, and New Jersey's inheritance tax depends on who receives assets—not the estate's size.
Even when taxes aren't the issue, real property transfers can be. Deed language, recording requirements, transfer tax forms, and lender consent (if there's a mortgage) determine whether funding happens smoothly or gets delayed past the window that made the plan attractive in the first place.
SLATs Compared to Other Planning Tools
A SLAT tends to shine when you want meaningful estate tax reduction and you're not willing to give up all access to the transferred wealth as a couple. It's often used to lock in today's higher exemption and shift future appreciation out of the donor spouse's estate. That said, other estate planning tools sometimes fit better depending on your circumstances.
GRATs (Grantor Retained Annuity Trusts) shift appreciation using a structured annuity that comes back to the grantor during the GRAT term. They serve a different purpose than spousal back-up access and can work well for certain growth assets. In New York, you'll still want to model how a GRAT affects estate tax cliff exposure.
Non-SLAT irrevocable trusts are often used when the primary goal is creditor protection or long-term control for children, without building in spousal access. In New Jersey, beneficiary class can matter for inheritance tax planning, so who ultimately receives the trust assets should be mapped early.
ILITs (Irrevocable Life Insurance Trusts) are common when the main goal is removing life insurance proceeds from the taxable estate. Some ILITs can be designed with spousal access, but that requires careful handling—it's not the default.
Outright gifts are simple and sometimes appropriate, but they surrender flexibility and control entirely.
How to choose: If your priority is tax reduction with a realistic access backstop, a SLAT is often the lead candidate. If your priority is shifting appreciation with a defined payback to you, consider a GRAT. If your priority is asset protection and control for children without spousal access, another irrevocable trust may fit better.
When a SLAT stands out: A NY-domiciled couple owns a Manhattan home, a NJ shore property, and a large brokerage account. They're concerned about the 2026 federal sunset and NY estate tax. A SLAT can move appreciating assets out of the taxable estate while allowing the beneficiary spouse access—provided NY timing (cliff and add-back) and NJ property logistics are handled correctly.
Risks That Deserve Your Attention
SLATs work best when risks are treated as design constraints, not afterthoughts. If any of these issues apply to you, it doesn't automatically mean "don't do a SLAT"—it means slow down and fix the weak point before funding.
Reciprocal trust risk: If both spouses create SLATs that are too similar, the IRS may apply the reciprocal trust doctrine (commonly associated with United States v. Grace) and treat each spouse as if they created a trust for themselves—undermining the estate tax result. A strong plan includes documented differences and a written reciprocity review before you gift assets.
Potential loss of step-up in basis: Assets moved out of the taxable estate[12] generally don't receive a step-up in cost basis at the donor's death. For highly appreciated assets, the capital gains tax cost to heirs can sometimes rival or exceed estate tax savings. A competent plan includes a real comparison (estate tax avoided versus capital gains potentially created) and discusses whether any basis-management approach is appropriate.
Divorce and access risk: Your access generally flows through your beneficiary spouse. In the event of a divorce, that practical benefit can disappear. Ask your attorney about divorce-trigger provisions, reserve-distribution concepts, or trustee-restructuring options appropriate under NY/NJ law. No clause can erase relationship risk, but thoughtful drafting can reduce avoidable damage.
Funding the wrong assets: Title defects, transfer restrictions, and liquidity problems are where SLATs get into trouble. Before funding, ask for a written asset-suitability assessment—what's appropriate to transfer, what isn't, and why. Make sure there's a documented funding plan with responsibilities and deadlines.
Which Assets Work Best in a SLAT
How transfers typically work: For cash and securities, you open a properly titled trust account and follow custodian transfer protocols (forms, medallion signature guarantees when required). For real estate, you need a deed drafted to the trustee, lender consent if mortgaged, proper recording, and required state/city transfer documents even if exempt. For business interests, you typically need an assignment, review of operating agreements, and formal valuation when appropriate. For life insurance, coordinate ownership and beneficiary changes with the carrier. For retirement accounts, planning is done through beneficiary designations rather than lifetime transfers.
Important caution: For NY residents, late-stage gifting may be less effective due to the gift add-back rule (verify current applicability with your attorney). For NJ, the bigger long-term issue is often inheritance tax, which depends on the recipient's category—transfers to a spouse are exempt, while transfers to certain other individuals may not be.
If long-term care is part of your family's "what-ifs," irrevocable trust planning should also be coordinated with Medicaid planning and asset-protection considerations—the best tax move isn't always the best life-planning move.
After the SLAT Is Signed: Making It Actually Work
Once the trust is signed, implementation is where plans succeed or fail. The paper trail isn't busywork—it's what proves the SLAT exists, is funded, and is being administered properly.
Many SLAT projects run in phases: design and term sheet, drafting and signing, funding/retitling and valuation, then tax reporting and first-year administration. The exact timing depends on asset type—brokerage transfers can move faster than real estate or business transfers.
As noted earlier, even grantor trusts typically need an EIN for account opening and titling purposes. Trust accounts must be titled in the SLAT's name, not informally "set aside." Brokerage transfers, deeds, assignments, and confirmations should be gathered in one funding file. The donor spouse typically files Form 709[13] for the calendar year the SLAT is funded (even if no gift tax is due), and coordination between attorney and CPA is essential.
Common timing errors to avoid: signing a trust but delaying funding until "later"; funding without completing valuations in time for accurate reporting; transferring real estate without confirming lender consent or recording requirements; failing to coordinate Form 709 early enough for a clean filing. A good SLAT process treats timing as part of the legal work, not an afterthought.
Trustee best practices: Keep SLAT assets separate from personal assets. Document trustee decisions, especially distributions. Run an annual compliance check covering accounts, beneficiaries, trustee succession, and any state changes. Store everything in a single, organized folder—executed documents, transfer confirmations, valuations, and tax filings.
NYC real estate example: If you transfer a NYC brownstone, plan for deed preparation and recording. You may need to file state and city transfer documentation even if the transfer is exempt (often including NY forms like TP-584 and RP-5217, plus NYC transfer tax filings where applicable). If a mortgage exists, lender consent may be required. The right process avoids accidental defaults, delays, or title problems.
Avoiding the Reciprocal Trust Trap
The IRS looks closely at "you for me, me for you" planning. If spouses create two trusts that are too similar in structure and economic effect, the IRS may apply the reciprocal trust doctrine and unwind the intended estate tax benefit.
How attorneys differentiate spousal SLATs: Different trustees (one trust uses an independent individual; the other uses a corporate fiduciary). Different beneficiary structures (one includes descendants while the other is narrower). Different funding (different asset types, values, and timing—not back-to-back mirror transactions). Different distribution mechanics (different standards or discretionary features).
What to request before you transfer assets: A signed reciprocity checklist and a short attorney memo explaining how the trusts differ. Ask for redlined drafts or another written record showing how the two trusts were intentionally made different. Also ask your attorney to confirm in writing that you received the reciprocity review before funding—that timing is part of building a defensible record.
Questions worth asking: Are trustees meaningfully different? Are beneficiary classes and remainder provisions different? Are distribution standards different? Was funding separated in time and amount? If you can't answer "yes" clearly, pause and request revisions before moving assets.
What to Bring to Your Attorney Meeting
To move quickly from "idea" to an implementable plan, have these documents ready:
The key question to ask: Based on date-stamped exemption figures, which ACTS items are "no" or "unknown" today, and what specific fixes would turn them into "yes" so we can fund confidently?
Your goal: Leave with a short term sheet and written summary of what's approved, what needs to be fixed, and what the timeline is for funding and tax reporting.
What Happens During a Consultation
Clients often wonder what a serious SLAT consultation actually looks like. A well-run process is structured, documented, and designed to prevent last-minute surprises.
For NY/NJ families, working with a firm that focuses exclusively on estate planning—and holds licenses in both states—can streamline matters when your plan needs to address New York's estate tax cliff and add-back timing alongside New Jersey's inheritance tax and real estate administration. At NY Wills & Estates, our estate tax planning work integrates seamlessly with the trust and funding mechanics that make SLATs succeed.
Many clients start with a short screening call to confirm fit, followed by a longer strategy consultation once documents are reviewed. You should expect clear follow-up communications: what we need from you, what you can expect from us, and which deadlines matter.
Document Review
Your attorney reviews your asset list, ownership records, prior estate plan, insurance, and any marital agreements. You receive a concise written summary identifying issues—title defects, valuation gaps, liquidity needs, and timing considerations including the 2026 exemption reduction and state-specific traps. Upload documents ahead of time through a secure portal so the meeting can focus on analysis, not paperwork collection.
ACTS Walkthrough
Together, you review Assets, Compatibility, Terms, and State Law. Each category is labeled clearly ("good," "needs work," or "not a fit"), and open issues are captured with prioritized next steps.
Term Sheet Preparation
Before long-form drafts, you receive a plain-English term sheet spelling out trustee design, distribution rules, trust protector provisions, divorce considerations, and the strategy for avoiding reciprocal trust treatment. Drafting shouldn't proceed until you approve this roadmap.
Fee Structure
A clear scope covers drafting, signing, funding guidance, expected valuation/appraisal work, and coordination for Form 709. Key dates are tracked through signing, transfers, and filing deadlines, and you know who's responsible for each step—attorney, CPA, custodian, title company, trustee.
Example scenario: For a Manhattan couple with $8M across NY real estate, securities, and NJ shore property, planning typically focuses on whether they're likely to face NY estate tax, how the 2026 federal sunset could affect them, and making sure NJ beneficiary and real estate logistics don't create avoidable delays or taxes. For a business owner, liquidity planning and transfer restrictions can become the central design constraint.
Preparing for Implementation
If you're moving toward implementation, certain tools help keep the process organized—especially when coordinating your attorney, CPA, and financial institutions. Ask your planning team about:
An exemption tracker (Federal, NY, NJ) with visible date stamps to keep everyone working from the same numbers. Projection tables that help visualize gift-and-growth impact under different scenarios. A printable ACTS worksheet for your consultation. A funding dos and don'ts guide to reduce retitling and documentation mistakes. A reciprocity packet including a checklist and recordkeeping instructions for your SLAT file.
Preparing for Your Consultation
To keep your consultation focused, upload (when available) deeds, recent account statements, existing estate documents, any draft trust documents you've received, and the date-stamped exemption figures you're using—or ask us to provide them. You can typically choose between an initial screening call and a full-length strategy consultation, scheduled by location (Manhattan or Hackensack) or by phone/video.
What to Expect in the Meeting
You and your attorney will review ACTS results, the proposed structure, and the funding plan together. You should leave with written next steps, especially if an issue arises (valuation delay, title defect, beneficiary disagreement). If a portal is used, clients typically receive access to key deliverables—term sheet, summary memo, and reciprocity documentation—before funding.
If You Need to Pause
Making Your SLAT Succeed
A SLAT can be an outstanding estate planning tool for high-net-worth married couples who want estate tax reduction plus practical flexibility. In NY/NJ, success rarely comes from drafting alone. The win is a plan that's timed well, funded correctly, documented defensibly, and built around the state rules that actually apply to your assets and your family.
Take the Next Step
If you're weighing a SLAT because you're near federal or New York thresholds, expect a consultation to focus on clarity: what you're trying to protect, what you can comfortably transfer, and what state-specific traps to avoid. The best outcome is either a SLAT designed and funded the right way, or confirmation that a different approach fits your family better—without wasting months on the wrong structure.
Call NY Wills & Estates today at 516-518-8586 to take the next step in protecting your family's future. During a consultation, you can discuss your specific estate planning needs with a specialized attorney, get clear answers about which documents and strategies are right for your situation, understand the legal requirements specific to New York or New Jersey, and receive a personalized plan of action with transparent guidance on next steps.
This is your opportunity to get focused counsel from attorneys who practice estate planning exclusively, with dual-state coverage and local offices for in-person meetings in Manhattan (450 7th Avenue) and Hackensack (15 Warren Street). Take the first step toward securing your family's legacy.
About This Guide
Credentials: This guide is written for educational purposes by an attorney admitted in New York and New Jersey, with experience in high-net-worth estate planning, multi-state real estate issues, and multi-generational trust planning. Offices: Manhattan (450 7th Avenue) and Hackensack (15 Warren Street). Content last reviewed June 2024.
Legal disclaimer: This article provides general information, not legal advice. The right approach depends on your marriage, assets, residency, and tax history. Tax laws and exemption amounts are subject to change. Consult a qualified attorney before drafting or funding a SLAT.
How we keep this guide accurate: Exemption and threshold figures are date-stamped and cross-checked regularly. Material legal and tax changes trigger off-cycle updates. Readers should confirm current figures and rules with their attorney and CPA before signing and funding, because thresholds, state laws, and IRS guidance can change.
Understanding the complexities of Spousal Lifetime Access Trusts is crucial to protecting your family’s legacy, and NY Wills & Estates offers focused, personalized estate planning guidance tailored to New York and New Jersey residents. Begin your individualized consultation to create a clear, comprehensive plan that safeguards your assets and reduces estate tax risks.