How a Spousal Lifetime Access Trust Helps New York Couples Move Wealth Without Losing Access

Key Takeaways:

A spousal lifetime access trust (SLAT) lets one spouse make a large, irrevocable gift while the other spouse remains a beneficiary—locking in a lifetime exemption today and removing future growth from the taxable estate. Careful design around trustee selection, distribution standards, and timing is essential to avoid the reciprocal trust doctrine and the tax setbacks that follow death or divorce. 

For couples in Brooklyn, Manhattan, and across New York with a net worth of $2 – 5 million, the federal lifetime gift and estate tax exemption is rarely a problem on paper—right now. The challenge is what happens next. Exemption amounts are scheduled to change, real estate keeps appreciating, and a single liquidity event can push an estate well over New York’s much lower estate tax threshold. A spousal lifetime access trust (SLAT) is one of the most flexible tools we use at our firm to move wealth out of a couple’s taxable estate without leaving them feeling cash-poor.

The New York estate planning attorneys at Landskind & Ricaforte Law Group, P.C. explain SLATs, how the gifting strategy works, and the design choices that determine whether it actually delivers on its promise. 

What Is a Spousal Lifetime Access Trust?

A SLAT is an irrevocable trust created by one spouse (the “donor spouse”) for the benefit of the other (the “beneficiary spouse”), and often the couple’s children or grandchildren. The donor funds the trust by using part of their lifetime gift tax exemption. Once the assets are transferred, they are removed from the donor’s taxable estate, along with any future appreciation.

The “lifetime access” part is what sets a SLAT apart from a typical irrevocable trust. Because the beneficiary spouse can receive distributions from the trust during the marriage, the household still has indirect access to the gifted wealth. The donor never has the right to those funds personally, but, while the marriage is intact, the family unit retains a meaningful safety net.

Why High-Net-Worth Couples Use a SLAT Gifting Strategy

For couples in the $2–5 million range, the SLAT gifting strategy is rarely about today’s tax bill. It is about protecting tomorrow’s family balance sheet. A well-designed SLAT can:

• Lock in a lifetime exemption while higher amounts remain available, before scheduled rollbacks reduce planning flexibility
• Shift future appreciation on closely held businesses, real estate, or concentrated stock positions out of the taxable estate
• Layer asset protection benefits, since trust property is generally beyond the reach of future creditors of the donor
• Coordinate with broader asset protection moves for clients who hold concentrated wealth in real estate or a closely held business

According to the IRS gift tax rules, federal gift tax filings are required for substantial lifetime transfers, and the technical rules that apply when forming a SLAT are unforgiving. That is why we coordinate the gift, the trust drafting, and the appraisal of any transferred assets carefully.

Funding a SLAT: What Goes in, and How

A SLAT can hold almost any non-retirement asset, but some choices work better than others:

• Cash and marketable securities
• Closely held business interests
• LLC membership units holding investment real estate or rental property
• Life insurance policies
• Concentrated public stock positions before a liquidity event

Couples typically gift assets they expect to grow—the goal is to remove the future appreciation, not just today’s value. Because the transfer is irrevocable and uses a portion of the donor’s lifetime exemption, valuation matters. Hard-to-value assets, such as private business interests, generally need a qualified appraisal to support the gift tax return.

How Distributions Work

The trustee can make distributions to the beneficiary spouse for needs the trust document permits—often health, education, maintenance, and support. Distributions can flow to the beneficiary spouse personally, or, in many cases, to children and grandchildren as additional permissible beneficiaries.

Choosing the right trustee matters enormously. Many couples name an independent trustee or pair the beneficiary spouse with an independent co-trustee to preserve flexibility while keeping the trust tax-efficient. Our guide on selecting an irrevocable trust trustee walks through the trade-offs.

The Reciprocal Trust Doctrine—and Why it Matters for Couples

A common idea is, “We’ll each create a SLAT for the other.” That instinct is understandable, but if done poorly, it is very dangerous. The reciprocal trust doctrine allows the IRS to “uncross” two SLATs that look like mirror images of each other, pulling the assets back into both spouses’ estates and erasing the tax benefit.

We design dual SLATs to look meaningfully different from one another. Common adjustments include:

• Funding each trust at different times, often months or years apart
• Using different trustees for each trust
• Varying the class of beneficiaries—one trust may include the children outright, the other through generation-skipping shares
• Differentiating distribution standards and powers of appointment

Done correctly, a couple can preserve flexibility for both spouses without triggering the reciprocal trust doctrine.

What Happens at Death or Divorce?

The biggest risk to a SLAT’s “access” feature is the loss of the beneficiary spouse. If that spouse dies first, distributions to the household stop. If the couple divorces, most well-drafted SLATs treat the former spouse as predeceased. Either way, the donor spouse no longer has indirect access through the household.

Couples planning around these risks may consider:

• Funding only a portion of an available exemption to preserve liquidity in the donor’s name
• Pairing the SLAT with a permanent life insurance policy to replace lost access
• Building in a “floating spouse” provision so a future remarriage can restore beneficiary status
• Coordinating with strategies that protect inherited assets in divorce

Tax Considerations Specific to New York

New York imposes its own estate tax with a lower exemption and a “cliff” feature: an estate that exceeds the threshold by more than 5% loses the entire exemption. According to the New York Department of Taxation and Finance, the cliff calculation can sharply increase tax on estates that creep just over the line. A SLAT can help a couple stay below the cliff by removing appreciation from the taxable estate well in advance.

Because New York does not have a separate state-level gift tax, lifetime gifts can be a powerful tool for state estate tax planning. However, gifts made within three years of death are pulled back into the New York estate, so timing matters. Establishing a SLAT well before any health change or major liquidity event helps preserve the planning benefit.

Working With Our New York Estate Planning Attorneys

A SLAT is a specialized solution—powerful when matched to the right family but costly when forced into the wrong fact pattern. Our attorneys evaluate income needs, asset mix, marital stability, and long-term goals before recommending whether a SLAT, an alternative trust structure, or a combination of strategies makes sense. The result is a plan that complements business interests, real estate holdings, and any Medicaid planning already in place.