Wealthy couples often face an estate tax: Here's their favorite legal maneuver to get around it
High-net-worth couples have no shortage of tools and strategies at their disposal to lower their tax obligations and pass on their wealth. But financial planners say one especially favorable arrangement has become a go-to in recent years—one that helps them pass on generational wealth while still benefiting from it during their lifetimes. It's called a spousal lifetime access trust, or SLAT.
SLATs are irrevocable trusts that let the spouses maintain access to their assets while keeping them out of their taxable estate. A growing number of wealthy customers are using them to take advantage of high estate and gift tax exemptions, a strategy that can lead to significant tax savings over a lifetime.
Here's how it works: One spouse, called the grantor, transfers her individually owned assets from her estate into the SLAT for the benefit of her spouse, called the beneficiary. Once removed from the grantor's estate, the future appreciation of the assets is also removed, meaning those gains won't be taxed.
But the couple aren't cut off from the money: The beneficiary spouse can access the assets in the SLAT for health, education, maintenance, and support for both him and his spouse, says Bob Peterson, senior wealth advisor at Crescent Grove Advisors. 'Some would say you are having your cake and eating it too.'
The primary purpose of a SLAT is to move future asset growth out of the estate, says Peterson. He gives the example of moving $5 million into the SLAT. If it eventually grows to $15 million, the $10 million appreciation is not subject to estate taxes upon the grantor's death. Establishing a SLAT can also be a good way to safeguard assets from creditors or claims against either spouse.
'It should be remembered that SLATs are an estate tax strategy, not necessarily an income tax strategy,' says Peterson. 'SLATs are typically structured as grantor trusts, so the grantor continues to pay income taxes on the trust earnings.'
This is an especially beneficial arrangement to some couples because many irrevocable trusts don't allow beneficiaries to take distributions until after the death of the grantor. With a SLAT, however, beneficiaries are able to withdraw the income or principal to maintain the couple's standard of living.
While those benefits may seem too good to be true, there are also drawbacks, says Peterson. The main one being that any gift is irrevocable—the grantor gives up all rights to the funds. That 'can become problematic in the event of divorce or the spouses passing,' says Peterson. Additionally, jointly owned assets cannot be transferred into the SLAT.
Grantors should be sure, then, that they can continue to live their lifestyle if they lose access to those funds in the future, for whatever reason. If the beneficiary spouse dies before the grantor, the remaining assets will pass to that spouse's beneficiaries, typically children, without estate taxes.
SLATs have been especially popular lately, thanks to the impending sunset of the 2017 Tax Cuts and Jobs Act, or TCJA. That law doubled the estate tax exemption, or the maximum that individuals and couples can give their beneficiaries during their lifetime and as part of their estate without paying federal gift or estate taxes.
The transfer of assets from one spouse's estate to the SLAT is reported on a gift tax return, meaning it is applied against the donor's lifetime gift and estate tax exemption. That currently stands at $13.99 million for individuals—and double for married couples—but could be halved come January, depending on what Congress is able to pass as part of its ongoing tax bill negotiations. That has created something of a race-against-the-clock mentality for some high-net-worth families, financial advisors say, should Congress fail to re-up the doubled exemption.
'By making a gift now, you can use the full $13.99 million, versus waiting until 2026 and only having the ability to gift around $7 million without gift tax consequences,' says Peterson.
But again, couples will want to be careful. The expanded exemption could easily be extended, and then they may have put limits on how they can access their funds for no reason.
This story was originally featured on Fortune.com
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
14-06-2025
- Yahoo
Weber County farmers hope to see immigration reform for agriculture workers
On Thursday, President Donald Trump said immigration policies are hurting the agriculture industry and that changes are coming. In Weber County, some farmers hope to see major changes. Ronald Stratford is a fourth-generation dairy farmer. 'I'm kind of a hobby farmer these days,' he told ABC4. He used to have 600 dairy cows. His family had been doing that for 65 years. However, these days the dairy cows are gone. In their place, 40 head that he's raising for meat. 'Semi-retired if you want to call it that but I don't know if this time of year that applies at all,' he added.' Currently, he has a couple of part-time employees. 'We had four full-time employees and my brother and me,' he said talking about staffing when the farm had dairy cows. 'It was a full-time job 24/7, 365.' As a farmer and the president of Utah Farmers Union, watching ICE raids at farms in other states has him worried. 'It's devastating,' he stated. 'If we lose the immigrant labor, I don't know how they'll survive.' Stratford said it is often hard to find employees, so farmers hire who the can. He often hired migrant workers throughout the years. They would show him identification before being hired. 'I would probably be foolish to think that not all of those guys had legal papers, but they do now,' he added. 'The work they did for me was essential. I couldn't have run this business without them.' He said those who worked for him were always hardworking, frugal, and family-oriented. He hopes there will be reform to allow those who've been working in the states to gain legal status, and help farmers hire year-round migrant workers. 'There is no federal program for a dairyman to hire the help that he needs,' Stratford stated. 'There is the H2A program which is seasonal workers only. Dairy is not seasonal.' A few miles away, Ogden Bay Produce uses the H2A visa program. 'Once we do all that paperwork and prove that there's that need,' owner and operator Matt Peterson told ABC4. 'We advertise and prove that no local citizens will want to apply for that position. Then the government will give us a number of worker visas.' Peterson said they fill about two thirds of their 30 seasonal employee positions this way. The visa allows the worker to stay from a few weeks to a few months. The longest any of Peterson's workers were able to stay was seven months. 'It's nice to know that these guys' whole purpose of being in our country is to work for me,' Peterson said. 'That's kind of some nice security to know.' Without the program, it would be impossible to run the farm's 170 acres because much of the produce they grow must be harvested by hand. 'But it's not a perfect program,' Peterson added. 'It's incredibly expensive for me as an operator to implement it.' Peterson explained that he provides the workers with housing, covers all travel costs to bring the workers to Utah and then to send them to Mexico when their visa is up, and the federal government sets the wage he pays them. He said this often puts a squeeze on farms, which then causes their prices to increase. 'I think all of the programs need to be reformed and make it easier for the farmers to get these workers up when we need them,' said Peterson. 'And then the guys that are here locally that want to work and have lived the majority of their lives here in Utah or America, who aren't documented and want to work, it's really difficult for them.' He echoed Stratford in naming the strong values his employees demonstrate, and said many of them have become some of his best friends. Copyright 2025 Nexstar Media, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
Yahoo
12-06-2025
- Yahoo
Wealthy couples often face an estate tax: Here's their favorite legal maneuver to get around it
High-net-worth couples have no shortage of tools and strategies at their disposal to lower their tax obligations and pass on their wealth. But financial planners say one especially favorable arrangement has become a go-to in recent years—one that helps them pass on generational wealth while still benefiting from it during their lifetimes. It's called a spousal lifetime access trust, or SLAT. SLATs are irrevocable trusts that let the spouses maintain access to their assets while keeping them out of their taxable estate. A growing number of wealthy customers are using them to take advantage of high estate and gift tax exemptions, a strategy that can lead to significant tax savings over a lifetime. Here's how it works: One spouse, called the grantor, transfers her individually owned assets from her estate into the SLAT for the benefit of her spouse, called the beneficiary. Once removed from the grantor's estate, the future appreciation of the assets is also removed, meaning those gains won't be taxed. But the couple aren't cut off from the money: The beneficiary spouse can access the assets in the SLAT for health, education, maintenance, and support for both him and his spouse, says Bob Peterson, senior wealth advisor at Crescent Grove Advisors. 'Some would say you are having your cake and eating it too.' The primary purpose of a SLAT is to move future asset growth out of the estate, says Peterson. He gives the example of moving $5 million into the SLAT. If it eventually grows to $15 million, the $10 million appreciation is not subject to estate taxes upon the grantor's death. Establishing a SLAT can also be a good way to safeguard assets from creditors or claims against either spouse. 'It should be remembered that SLATs are an estate tax strategy, not necessarily an income tax strategy,' says Peterson. 'SLATs are typically structured as grantor trusts, so the grantor continues to pay income taxes on the trust earnings.' This is an especially beneficial arrangement to some couples because many irrevocable trusts don't allow beneficiaries to take distributions until after the death of the grantor. With a SLAT, however, beneficiaries are able to withdraw the income or principal to maintain the couple's standard of living. While those benefits may seem too good to be true, there are also drawbacks, says Peterson. The main one being that any gift is irrevocable—the grantor gives up all rights to the funds. That 'can become problematic in the event of divorce or the spouses passing,' says Peterson. Additionally, jointly owned assets cannot be transferred into the SLAT. Grantors should be sure, then, that they can continue to live their lifestyle if they lose access to those funds in the future, for whatever reason. If the beneficiary spouse dies before the grantor, the remaining assets will pass to that spouse's beneficiaries, typically children, without estate taxes. SLATs have been especially popular lately, thanks to the impending sunset of the 2017 Tax Cuts and Jobs Act, or TCJA. That law doubled the estate tax exemption, or the maximum that individuals and couples can give their beneficiaries during their lifetime and as part of their estate without paying federal gift or estate taxes. The transfer of assets from one spouse's estate to the SLAT is reported on a gift tax return, meaning it is applied against the donor's lifetime gift and estate tax exemption. That currently stands at $13.99 million for individuals—and double for married couples—but could be halved come January, depending on what Congress is able to pass as part of its ongoing tax bill negotiations. That has created something of a race-against-the-clock mentality for some high-net-worth families, financial advisors say, should Congress fail to re-up the doubled exemption. 'By making a gift now, you can use the full $13.99 million, versus waiting until 2026 and only having the ability to gift around $7 million without gift tax consequences,' says Peterson. But again, couples will want to be careful. The expanded exemption could easily be extended, and then they may have put limits on how they can access their funds for no reason. This story was originally featured on
Miami Herald
10-06-2025
- Miami Herald
With workplace incivility on the rise, these companies are trying harder to bring workers together
Linda Peterson spent years working in salons where she didn't feel valued. So when she set out to open her own salon, she knew it had to be different, starting with a big break room where employees could gather to decompress and talk openly. "I know I don't make money in my break room, but what it did is it created a culture in which people could have conversations," said Peterson, who owns Beau Monde Salon in Burnsville, Minnesota. "And it's really cool, because you get to hear different points of view on things, and it never gets heated. They have a great conversation and then they learn from each other and they just go back to work, doing what they love." Beau Monde is bucking a national trend. Workplace incivility, from harsh emails to physical violence, is on the rise, according to the Society for Human Resource Management (SHRM). Employees reported over 20% more uncivil interactions in the first quarter of 2025 compared to the prior year, when the organization launched its Civility Index. Nationwide political divisions and deteriorating discourse seem to be bleeding into the office. More than half of U.S. workers believe American society is uncivil, SHRM reported, and differing views on political and social issues were top contributors to the uptick in workplace incivility. "With the state of the world, I think even beyond the country, there's just a lot of volatility," said Anna Deley, talent management and regional general agent at Deley Organization-Globe Life in Coon Rapids, Minnesota. That volatility has real costs. Reduced employee productivity and absenteeism due to incivility costs U.S. businesses about $2 billion a day total, according to SHRM. "It's no longer something that's floating around in the background. We actually view this as a crisis that workers and workplaces need to address," said Jim Link, SHRM's chief human resources officer. "There are societal divides out there, and they have a deep impact in our workplaces and, more broadly perhaps, in our communities at large." Company leaders say they've worked to foster a culture where employees feel seen and heard and where tough, respectful conversations are encouraged. The first step? Hiring the right people. Derek Freese, executive vice president at Award Staffing, said the Edina, Minnesota-based company intentionally hires people who don't have previous staffing agency experience. It's a different approach, he said, when economic uncertainty is making it easy for employers "to fall back on the transactional nature of hiring" and opt for the safe choice. "Our mantra and our philosophy is the résumé and the job description is about 40% of what we're hiring for," Freese said. "The other 60% is ... the characteristics, it's the human experience." Once those new hires are in the door, there are regular opportunities to connect with other employees. Once a week, Award closes all its office locations and brings everyone to headquarters for a "better together day" with food and activities. Other top employers are taking a similar approach. The Deley Organization offers training and support for new employees working toward insurance licensure, including those who want to get licensed in multiple states, Deley said. State General Agent Chad Deley is available to employees round the clock, Anna Deley said. While there's plenty of scheduling flexibility "so you can still make your daughter's dance recital," she said, there's also a physical office space for employees who want to meet in person. "We want to make sure everyone feels included, supported and heard," Deley said. Edina-based FRSecure has helped employees get to know each other amid fast growth and virtual onboarding, said President Oscar Minks. Staffers get paired up as "hacker buddies," he said, and monthly mental health bingo encourages employees to reach out to co-workers or friends they haven't connected with in a while. Employees and their spouses get to attend a big, all-expenses-paid company party every year. "On top of all those initiatives, the most important thing for me is everybody feels like they belong here," Minks said. "And everybody feels like they're cared for; we have compassion for you and we want you to be successful." When problems do come up, company leaders said, they aim to lead by example and tackle them head-on. "It's our responsibility as leaders to give (employees) the voice, the space, the guidance to address their concerns," Freese said. "If we don't, or we don't understand what they are or what they look like, they're going to quit." At Beau Monde, Peterson said she often participates in employee conversations. When she opened the salon, she wanted her office to adjoin the break room so she could easily chime in - and make sure things stay civil. When politics started coming up, Peterson said, "I told all of them, you know, it's part of our world and we need to discuss it and if you guys can talk about it in a good way, great, but if you start feeling like it's causing tension, that conversation needs to end." After consulting with FRSecure's employee experience committee, Minks said he decided to address the national pushback against diversity efforts with the staff. He wanted to make it clear the company's culture wasn't changing, he said. "We just decided to take it head-on at one of our all-company quarterly meetings, and just really give a message of reassurance that for us, this idea of diversity really matters," Minks said. "I've always just been a believer that if everyone who's on our, say, technical team or consulting team is from the same background, from the same space, and they have the same experiences, then we never give ourselves the ability to evolve and grow." Copyright (C) 2025, Tribune Content Agency, LLC. Portions copyrighted by the respective providers.
