You have worked hard to build wealth that can support your family for generations. Today, both federal and Connecticut estate tax rules can place that legacy at risk.
A spousal lifetime access trust, or SLAT, can help you plan ahead while still allowing indirect access through your spouse. Here are three of the most beneficial ways a SLAT can protect your family’s wealth.
Shift future appreciation outside your taxable estate
You can move high-value assets into a SLAT while values remain favorable. Future growth then occurs outside your taxable estate. This approach can reduce both federal and Connecticut estate tax exposure over time.
This matters in Connecticut, where the estate tax threshold is lower than the federal level. Many wealthy families reach this threshold sooner than expected since assets such as real estate and closely held business interests often see strong growth. A SLAT can help you preserve that growth for your children and their families.
Use grantor trust status to manage tax exposure efficiently
A SLAT is often structured as a grantor trust. You remain responsible for income taxes on trust earnings, which allows the trust assets to grow without reduction for taxes.
When you pay income taxes on the trust’s earnings, you effectively transfer additional wealth to the trust without triggering gift tax, provided you do not receive reimbursement from the trust. In Connecticut, high income tax rates can make this strategy more impactful.
However, you must also note that beneficiaries will not receive a step-up in basis at your death for assets held in the SLAT, unlike assets you hold until death.
Strengthen protection against future claims and liabilities
A SLAT can also support asset protection goals. Once you transfer assets to the SLAT, you no longer own them, which means your spouse’s creditors generally cannot reach these assets.
This is important if you hold business interests or high-value real estate. However, because you retain indirect access through your spouse, the trust offers you limited protection from your own creditors, especially if you transferred assets while facing existing claims or within Connecticut’s fraudulent transfer look-back period.
Position your family for long-term control and continuity
A SLAT can help you manage tax exposure, preserve growth and support long-term stability. It also creates a structure that can benefit your children and future generations.
Each SLAT must reflect your assets, your family structure and Connecticut law. Legal counsel often helps shape these details and coordinates with your tax advisors. This level of planning can help your strategy remain effective as laws and circumstances evolve.