The federal gift and tax application exclusion amount, or exemption, was raised from $5.49 million per individual to $11.58 million per individual last year. This means that a married couple can transfer about $23 million without having to pay a gift tax or estate tax. However, the federal gift and estate tax exemption is set to decrease again in 2026. On January 1, 2026, the exemption is scheduled to revert to the previous limit, which is estimated to be around $6 million per individual at that time, though, the exact amount depends on inflation. According to federal regulations, individuals and couples who take advantage of the exemption prior to 2026 will not be adversely affected when the cap decreases. The increased limit has inspired many families to consider ways of taking advantage of the exemption before it decreases. One way families have considered doing so through Colorado estate planning measures is by creating a Spousal Lifetime Access Trust.
A Spousal Lifetime Access Trust (SLAT) is a gift from one spouse to an irrevocable trust with the other spouse as the designated beneficiary. Unlike some similar trusts, the SLAT is established by a gift while both spouses are still alive. Other family members such as children and grandchildren can also be beneficiaries of the trust. A SLAT allows the donor spouse to transfer up to the exemption limit without incurring a gift tax. The value of the assets in the SLAT is excluded from the donor spouse’s gross estate and not subject to the estate tax upon the donor’s death. The appreciation of the SLAT assets may not be subject to estate tax, as SLATs are excluded from the beneficiary spouse’s gross estate and not subject to an estate tax when the beneficiary spouse dies.
The beneficiary spouse can request distributions from the trustee during their lifetime if needed. The trustee can then approve the request and distribute the income or the beneficiary spouse. However, the distributions will be reintroduced into the taxable estate, and the goal of a SLAT is to allow the trust assets to grow for future generations outside of the taxable estate. The SLAT has some drawbacks and risks, and a married couple’s particular personal and financial circumstances should be considered before setting up a SLAT. Consult with an estate planning lawyer to determine if a SLAT is right for you.
Contact the Dedicated Colorado Estate Planning Lawyers at Braverman Law Group
Having a strong estate plan is essential for ensuring that your wishes are carried out in the event of your death or sudden incapacity. Braverman Law Group, LLC provides personalized counseling and carefully crafted estate planning documents on behalf of clients from all walks of life. Braverman Law Group provides Colorado estate planning documents such as wills, trusts, powers of attorney, pet trusts, and guardianship planning for individuals and families in the Boulder Valley. They provide customized solutions and documents tailored to meet the client’s unique needs and wishes. Call them at (303) 800-1588, email them, or contact them online to set up a free consultation.