The more complex your goals, the more crucial the timing. This is especially true if you want to maximize your estate tax savings under the current $5.12 million estate and gift tax exemption set to expire at the end of 2012.
So, how can spouses maximize their giveaways and still retain some takeaways when it comes to their wealth? Forbes recently considered this question in a recent article titled "Spousal Lifetime Access Trusts--Use Your Gift Tax Exemption Without Giving It All Away." The answer: a Spousal Lifetime Access Trust – SLAT.
Essentially, with the SLAT approach, each spouse can give their respective $5.12 million exemption amounts into separate irrevocable trusts. However, each spouse also names the other as the SLAT beneficiary and other loved ones (their children, commonly) as secondary beneficiaries.
To be sure, there are some very important steps required for a SLAT to pass IRS muster, to include avoiding application of the dreaded "reciprocal trust doctrine." Do not undertake any estate planning without the advice of competent legal counsel.
Reference: Forbes (August 9, 2012) "Spousal Lifetime Access Trusts--Use Your Gift Tax Exemption Without Giving It All Away"