If you’re a business owner or professional with significant assets, you need more than a basic estate plan. You need strategies that protect your business operations, shield your wealth from creditors, and ensure your family maintains access to resources—even if you become incapacitated or pass away. One increasingly versatile tool that addresses these concerns is the Spousal Lifetime Access Trust (SLAT).
As we move into 2026 with new tax legislation increasing the federal estate tax exemption to $15 million per person, the focus of SLAT planning is shifting from urgent estate tax reduction to broader wealth protection strategies. This evolution makes SLATs particularly relevant for business owners and professionals seeking asset protection and income tax planning.
What Is a Spousal Lifetime Access Trust (SLAT)?
A SLAT is an irrevocable trust where one spouse transfers assets for the benefit of the other spouse and potentially descendants. When properly structured, these assets are removed from your taxable estate and protected from creditors, while still allowing indirect access through distributions to your spouse.
Why Business Owners Should Consider SLATs in 2026
With the reduced urgency around estate tax planning due to higher exemptions, SLATs are evolving to serve three primary objectives for business owners and professionals:
- Asset Protection: Shield business assets, investments, and personal wealth from potential creditors, lawsuits, or business liabilities
- Income Tax Savings: Properly structured nongrantor SLATs can provide meaningful state income tax benefits, particularly for high-income professionals
- Business Continuity: Ensure your family maintains access to resources that support business operations and personal needs if you become incapacitated
Three Types of SLATs: Which Is Right for Your Business?
1. Completed Gift SLAT: Traditional Estate Tax Planning
Best for: High-net-worth business owners exceeding the $15 million exemption threshold
In this structure, you transfer assets to an irrevocable trust that removes them from your taxable estate while shielding them from creditors. The trust is taxed as a grantor trust, meaning you pay income taxes on the trust’s earnings without it being treated as an additional gift, allowing assets to grow tax-free.
Real-world application: A successful professional with a $20 million estate transfers $5 million in appreciated business interests to a SLAT, removing future appreciation from estate taxation while maintaining indirect access through spousal distributions.
2. Incomplete Gift SLAT: Maximum Asset Protection
Best for: Business owners prioritizing creditor protection over estate tax savings
With upcoming tax changes making estate taxes less relevant for most families, incomplete gift SLATs are gaining popularity for asset protection planning. You transfer assets to the trust but retain certain powers (such as veto rights over distributions), making the gift “incomplete” for tax purposes while still providing robust asset protection under state law.
Real-world application: A physician facing potential malpractice exposure transfers investment accounts to an incomplete gift SLAT, protecting those assets while maintaining control and keeping them in the estate for step-up in basis benefits.
3. Completed Gift Nongrantor SLAT: Income Tax Planning Strategy
Best for: High-income professionals in high-tax states seeking income tax savings
This structure is established in a jurisdiction without state income tax and is intentionally designed to avoid grantor trust status. Distributions to your spouse require consent of an adverse party, and the trust must avoid creating a nexus with high-tax states like California.
Real-world application: A California-based business owner generating significant passive income establishes a nongrantor SLAT in Nevada, potentially saving substantial state income taxes annually while still maintaining family access to trust assets.
Critical Risks Every Business Owner Must Understand
The Reciprocal Trust Doctrine
If spouses create substantially similar SLATs for each other, the IRS may “uncross” them and treat each spouse as retaining ownership, defeating the estate tax benefits. Solution: Ensure each spouse’s SLAT has distinct terms and beneficiaries.
Implied Agreement Concerns
If you transfer most of your liquid wealth to a SLAT without retaining sufficient assets for personal expenses, the IRS may argue an implied agreement exists that you expected to benefit from the trust, potentially including assets back in your estate under IRC Section 2036(a).
No Step-Up in Basis
Assets in a completed gift SLAT don’t receive a step-up in basis at death, potentially creating capital gains tax liability for beneficiaries. This can be mitigated by including a power of substitution in the trust document.
Divorce Considerations
Without specific provisions, you could lose all access to trust assets after divorce while remaining liable for income taxes if structured as a grantor trust. Business owners should address this scenario explicitly in trust documents.
How SLATs Complement Your Durable Power of Attorney
While a Durable Power of Attorney (DPOA) ensures someone can manage your business operations and financial affairs if you become incapacitated, a SLAT provides an additional layer of protection by moving assets into a protected structure that continues operating independently of your capacity. Together, these tools create comprehensive business continuity and wealth protection.
Is a SLAT Right for Your Business and Family?
SLATs remain a flexible and powerful tool when thoughtfully structured for your specific goals. The key is understanding which type of SLAT aligns with your priorities:
- If estate tax reduction is still your primary concern: Completed Gift SLAT
- If asset protection from creditors is your focus: Incomplete Gift SLAT
- If income tax savings matter most: Nongrantor Completed Gift SLAT
What remains essential is thoughtful design, precise implementation, and ongoing administration. Modern SLATs demand not only technical accuracy but also strategic foresight tailored to your unique business and family situation.
Protect Your Business Legacy with California Probate and Trust
At California Probate and Trust, PC, our certified estate planning specialists understand the unique challenges facing business owners and professionals. We’ve helped thousands of clients from our Sacramento, Fair Oaks, and San Francisco offices develop comprehensive asset protection strategies that safeguard their businesses and families.
Schedule your free consultation today to discuss whether a SLAT or other asset protection structure is right for your situation. Our experienced attorneys will take the time to understand your business, family dynamics, and financial goals to create a personalized plan that protects what you’ve built.
Call (866) 674-1130 or visit cpt.law/contact-us to claim your free estate planning consultation.
Source: Revisiting SLATs in 2025: Expanding Opportunities and Evolving Uses by Christina M. Chan, CEB Articles