If you have an estate worth more than $7 million (or $14 million as a married couple), the window to use a Spousal Lifetime Access Trust — a SLAT — to lock in today’s historic gift tax exemption is closing faster than most people realize. The current federal lifetime gift and estate tax exemption sits at roughly $13.6 million per person thanks to the 2017 Tax Cuts and Jobs Act, but that law is set to sunset on December 31, 2026. When midnight strikes, the exemption is expected to drop by nearly half — back to around $7 million per person, adjusted for inflation. A SLAT lets you gift assets to a trust for your spouse’s benefit right now, using today’s larger exemption, effectively locking in a tax shelter before the rules change. Once the sunset happens, that opportunity is gone for good.
What Exactly Is a SLAT and How Does It Work?
A Spousal Lifetime Access Trust (SLAT) is an irrevocable trust — meaning you can’t easily take it back — that one spouse sets up for the other spouse’s benefit. You, as the “donor spouse,” transfer assets into the trust using your lifetime gift tax exemption. Your partner, the “beneficiary spouse,” can then receive income or distributions from the trust during their lifetime. Because the assets are legally out of your taxable estate, they won’t be subject to federal estate taxes when you pass away.
Think of it as a way of saying: “I’m giving this wealth away on paper now, while the rules are generous, but my spouse can still benefit from it.” Children or grandchildren are typically named as remainder beneficiaries, meaning they inherit what’s left after both spouses are gone.
The key risk — and it’s worth saying clearly — is that if your spouse dies before you, you generally lose access to those assets entirely. A good estate-planning attorney will help you structure the trust carefully to balance protection with flexibility.
Why Is the Deadline So Urgent Right Now?
Congress has been debating whether to extend the elevated exemption, but as of July 2026, no extension has passed into law. Estate planning attorneys and financial advisors across the country are sounding the alarm: if you want to use a SLAT, the trust needs to be drafted, reviewed, signed, and funded well before December 31, 2026. That sounds like plenty of time, but trust creation involves legal drafting, asset appraisals (especially for real estate or business interests), and coordination between your attorney, financial advisor, and sometimes a CPA. This process routinely takes three to six months. If you’re reading this in late July, you have perhaps four to five months of runway — and attorneys’ calendars are already filling up.
The IRS has confirmed through regulations that gifts made under the current exemption will not be “clawed back” even after the sunset — meaning if you act now, those transfers are protected. That clawback protection is arguably the most important reason not to wait.
Who Should Seriously Consider a SLAT?
A SLAT makes the most sense if:
- Your combined estate exceeds $14 million, or you expect it to grow to that level
- You and your spouse are in good health and have a stable marriage
- You have sufficient liquid assets outside the trust to cover your own living expenses
- You want to reduce estate taxes while keeping wealth accessible to your family
If your estate is below the expected post-sunset threshold of around $7 million per person, a SLAT is probably not your most pressing planning tool right now. But if you’re in that upper tier, the potential tax savings can be measured in millions of dollars — making every week of delay genuinely costly.
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How Does This Connect to Your Broader Retirement Tax Picture?
A SLAT doesn’t exist in a vacuum. Smart retirees think about estate planning alongside Social Security timing, Medicare costs, and required minimum distributions (RMDs) — because they all interact.
For example, shifting significant assets into a SLAT may lower your overall taxable income in future years, which could reduce how much of your Social Security benefit is taxed (up to 85% of your benefit can be taxable if your “combined income” is high enough). It could also reduce your exposure to Medicare IRMAA surcharges — those are the extra premiums higher-income retirees pay on top of standard Medicare Part B and Part D costs. In 2025, the standard Medicare Part B premium is $185 per month, but IRMAA surcharges can push that well above $600 per month for individuals with higher incomes. Strategic estate planning that reduces your modified adjusted gross income (MAGI) helps you stay in lower IRMAA brackets.
RMD rules for 2025 and 2026 are also worth keeping in mind: under current law, required minimum distributions from traditional IRAs and 401(k)s begin at age 73. Those mandatory withdrawals add to your taxable income every year. While IRAs typically cannot be transferred into a SLAT directly (due to tax rules on retirement accounts), you might redirect other non-retirement assets — like brokerage accounts or real estate — freeing up your overall financial picture.
What Steps Should You Take This Week?
- Call an estate-planning attorney this week. Not next month. Calendars fill up as the year-end rush begins.
- Get a current estimate of your net worth, including the value of your home, investments, retirement accounts, and any business interests.
- Talk to your financial advisor about which assets are best suited to fund a SLAT versus which you should keep accessible.
- Review your Medicare and Social Security strategy while you’re at it — these conversations tend to surface planning opportunities you didn’t know existed.
The SLAT window is real, the deadline is firm, and the stakes are high. Retirees who act thoughtfully in the next few months could save their families hundreds of thousands — or millions — in future estate taxes. Those who wait until November may find attorneys too busy to help in time.
Frequently Asked Questions
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Frequently Asked Questions
When should I claim Social Security to maximise my benefit?
The longer you wait to claim Social Security — up to age 70 — the larger your monthly benefit becomes, with an increase of roughly 8% for every year you delay past your full retirement age. If you’re in good health and don’t need the income immediately, delaying to 70 typically delivers the highest lifetime payout. Claiming early at 62 permanently reduces your benefit by up to 30%.
How much of Social Security is taxable?
Up to 85% of your Social Security benefit can be subject to federal income tax, depending on your “combined income” — which is your adjusted gross income, plus nontaxable interest, plus half your Social Security benefit. If that combined income exceeds $34,000 for singles or $44,000 for couples, 85% of your benefit is taxable. Keeping other taxable income low through careful planning can reduce this burden.
What are the RMD rules for 2025 and 2026?
Under current law, required minimum distributions (RMDs) from traditional IRAs and most employer retirement plans must begin at age 73. The amount you must withdraw each year is calculated by dividing your account balance by an IRS life-expectancy factor. Failing to take your RMD on time triggers a steep penalty — currently 25% of the amount you should have withdrawn, though it can be reduced to 10% if corrected promptly.
How do I avoid Medicare IRMAA surcharges?
Medicare IRMAA (Income-Related Monthly Adjustment Amount) surcharges kick in when your modified adjusted gross income (MAGI) exceeds certain thresholds — in 2025, above $106,000 for individuals or $212,000 for couples. Strategies to avoid IRMAA include Roth conversions in lower-income years, managing the timing of capital gains, and using qualified charitable distributions (QCDs) from your IRA instead of taxable withdrawals. You can also appeal an IRMAA determination if your income dropped due to a life-changing event like retirement.
What is the Medicare Part B premium for 2025?
The standard Medicare Part B premium for 2025 is $185 per month per person. However, higher-income retirees pay more through IRMAA surcharges, with premiums ranging up to approximately $628 per month depending on income level. Most people have their Part B premium deducted automatically from their Social Security benefit each month.