Tax Law Gives Limited Window to Make Large Gifts but Without Good Advice, Many Hesitate

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This online article titled Gift Tax Exemption Jumps, But Not Everyone’s Feeling Generous, by Jerry Gleeson, which appeared in Registered Rep, highlights the tremendous, possibly short-lived, opportunity current tax law provides to families and owners of family businesses to transfer tremendous value without the restraints of gift, estate and generation tax.  Essentially, Congress has given individuals the ability to transfer up to $5 million during life or at death, free of gift, estate and GST tax.  This is referred to as the “Exemption Amount,” and is the amount a person can pass free of federal gift or estate tax.  With good planning, a married couple can transfer twice the Exemption Amount free from transfer taxes.  So in this case, married couples can transfer up to $10 Million.   However, the Exemption Amount is scheduled to fall back to $1 Million on January 1, 2013.

This limited time offer allowing families to transfer significant wealth free from transfer tax is a great opportunity.  However, many families aren’t comfortable transferring significant wealth out of concern for financial market variability and the possible need to have access to those assets in the future.  Don’t stop there, however.  Good planning can introduce the benefits of a Spousal Lifetime Access Trust or “SLAT” (sometimes also called a “rainy day trust).

 A SLAT is an irrevocable trust structure that allows a married person to put assets in a trust for spouse and descendants with the ability to make distributions to the spouse if needed.  Otherwise the assets grow free of transfer tax and are protected from most creditors inside the trust.  Other sophisticated features can be built in to give greater assurances that assets are available to the trust creator in the event of a financial meltdown.

There are other variations of irrevocable trusts that allow varying degrees of access to transferred assets as well, so don’t just stop when clients hesitate when you mention “irrevocable transfers.”

If you would like further information on SLATs, please feel free to email me at to request a White Paper titled “Advanced Estate Planning:  Spousal Lifetime Access Trusts.”

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