Solutions for Spouses

Life Insurance Enhances SLAT Planning

In February, we celebrate Valentine’s Day, a holiday created exclusively for couples.  And what’s more romantic than giving your spouse a sense of security for the future?  As with many other aspects of financial planning, having a spouse can be beneficial when implementing life insurance.  When considering planning using a Spousal Lifetime Access Trust (SLAT), there are some nuances to consider. 

First, let’s identify who benefits from a SLAT.  Candidates for SLAT’s include:

·        Spouses who want to move assets out of each spouse’s estate while providing continued access to, and control of, trust assets

·        Spouses (especially young couples) who are not yet ready to make substantial gifts but want access to the temporarily doubled Federal Estate Tax Exemption before it is scheduled to sunset in 2026

·        Spouses who want to implement life insurance policies for estate planning or wealth replacement while maintaining access to assets that will be used to pay life insurance premiums

·        Spouses who are interested in using multiple trusts to complete multi-generational legacy planning

Using either a survivorship life insurance policy or individual life insurance policy can add specific considerations when contemplating the planning for a SLAT.  For survivorship policies: (1) the non-grantor spouse cannot be a trustee, so another trustee needs to be arranged; (2) if the grantor spouse dies first, how will gifts be paid to the trust for premiums; (3) if the non-grantor spouse dies first, only the trust beneficiaries will have access to trust assets.  For individual policies: (1) the non-grantor spouse can be the trustee and can make HEMS distributions; (2) the combined annual premium cost for first spouse’s policy plus the second spouse’s policy can be much higher than the survivorship policy’s annual premium; (3) when the grantor spouse dies, the non-grantor spouse loses direct access to the assets in the SLAT  (although life insurance on the grantor spouse should replace the assets that the non-grantor spouse can no longer access).

Strategies such as Stacking Gifts or creating The Triple Trust Solution can also be used with SLAT’s to complete the planning.  Click here to explore how Life Insurance Enhances Planning with SLAT’s.  The tax and legal references discussed herein are provided with the understanding that Heirmark is not engaged in rendering tax, legal, or actuarial services.  If tax, legal, or actuarial advice is required, consult an accountant, attorney, or actuary. Heirmark does not replace those advisors.

Contact us with any questions or opportunities to help your clients achieve their goals.  This is what we enjoy doing for only a select number of families, businesses, and charitable institutions each year, and we look forward to hearing from you.