Legal Review Block
Reviewed on: October 9, 2026
Attorney: James G. Burns, Esq., LL.M.
Credentials: TEP (Trust and Estate Practitioner), Member of STEP; Selected to Super Lawyers: 2022–2027; Top-Rated Lawyer (Avvo 2021); America's Most Honored Lawyers (2020)

Quick answer

A spousal lifetime access trust (SLAT) can use one spouse's federal gift and estate tax exclusion to transfer assets out of that spouse's estate while allowing a beneficiary spouse limited access under the trust's terms. In 2026, the basic exclusion is $15 million per person. A SLAT is irrevocable, California property characterization matters, and access is not guaranteed.

When the family changes but the trust does not

A trust can be perfectly valid and still be poorly matched to the family that now has to live with it. A business may have grown, a child may have joined the company, or one spouse may need access to assets more than the plan anticipated. The law may have changed too.

That is why a SLAT should not be approached as a clever document or a quick use of a large exemption. It is a major transfer of control. The donor spouse gives assets to an irrevocable trust; the beneficiary spouse may receive distributions under its terms, often alongside descendants. The donor generally cannot be a beneficiary, reclaim the assets, or keep control that would defeat the transfer.

The practical trade is stark: potential estate-tax planning in exchange for giving up direct ownership and relying on the other spouse's permitted access. Before considering a SLAT, review the whole system: ownership, existing trusts, family needs, tax exposure, and the consequences if the spouses separate or the beneficiary spouse dies.

Key takeaways

• The 2026 federal basic exclusion amount is $15 million per person under IRC §2010(c)(3), as amended by the One Big Beautiful Bill Act.
• The amended statute sets the basic exclusion at $15,000,000 and indexes it for inflation for calendar years after 2025; the 2026 adjustment is zero, so the 2026 amount remains $15,000,000, and the first increase is expected in the 2027 figures.
• A SLAT is irrevocable. The donor spouse generally can't receive trust distributions or retain powers that undermine the transfer.
• The beneficiary spouse's access is the structure's practical limit, not a promise that funds will be available to the donor.
• California community-property characterization must be addressed before funding; federal gift-tax and estate-tax treatment are separate questions.
• Two mirror-image trusts can raise the reciprocal-trust doctrine under United States v. Estate of Grace.

The current guidance signal, and what it does not mean

On September 29, 2026, Treasury and the IRS released the 2026–2027 Priority Guidance Plan. Project 34 lists regulations under IRC §2010 concerning the increased estate and gift tax exemption and related issues. The plan year begins October 1, 2026 and runs through September 30, 2027, and the Plan itself states that it provides no deadline for completing the listed projects.

A Priority Guidance Plan item is an intention to issue guidance. It is not a proposed rule, final rule, or legal authority. The governing statute remains IRC §2010(c)(3), as amended by Pub. L. No. 119-21, § 70106. The amended statute sets the basic exclusion at $15,000,000 and indexes it for inflation for calendar years after 2025. The 2026 basic exclusion amount is $15,000,000 under IRS Rev. Proc. 2025-32, the annual inflation-adjustment revenue procedure. The 2026 adjustment is zero, so the 2026 amount remains $15,000,000, and the first increase is expected in the 2027 figures. A family should plan under enacted law, while keeping an eye on future guidance and legislation.

For a broader look at the current federal framework, see the firm's estate-planning articles at jamesburnslaw.com/blog.

Exposure comparison

A SLAT works through the transfer of ownership and future appreciation, not a promise of tax savings. It should fit the couple's liquidity and governance plan, not just the number printed on an exemption chart.

California ownership rules in plain English

California law generally treats property acquired during marriage while domiciled in California as community property, subject to statutory exceptions. Family Code §760 states that baseline rule. Section 850 permits spouses to change property character by agreement or transfer. Section 852 requires a written express declaration, made, joined in, consented to, or accepted by the spouse whose interest is adversely affected; real-property recording can also matter to third parties.

That makes the funding source essential. Before moving assets into a SLAT, identify whether they are separate or community property, document the ownership history, and determine whether any transmutation is intended. A transfer document alone should not be assumed to resolve every characterization issue.

Federal transfer-tax rules are separate. IRC §§2501 and 2511 apply gift tax principles to transfers, including transfers in trust. Whether a gift is complete depends on the donor's retained dominion and control; the label “irrevocable” does not settle the tax question (Treas. Reg. §25.2511-2). Under IRC §2513, spouses may elect to split qualifying gifts, subject to statutory eligibility, consent, and filing rules. Gift splitting is not automatic and can create joint and several gift-tax liability.

IRC §2523 concerns the gift-tax marital deduction for qualifying transfers to a spouse. It is not a blanket exemption for assets transferred to a SLAT for a spouse and descendants. Terminable-interest rules and the terms of any spouse's interest matter; a noncitizen spouse also faces the rule in §2523(i). Have the gift-tax treatment reviewed separately from the trust's estate-tax design.

Because a SLAT is commonly structured as a grantor trust, the donor reports the trust's income on the donor's own federal return and, under California's conformity to the grantor trust rules, on the California return as well, which is the cost of the structure and the thing that becomes painful if the spouses separate. Under IRC §672(e), a spouse's interest is attributed to the grantor based on the spouses' marital status when the power or interest was created. Because IRC §682 was repealed for instruments executed after December 31, 2017, grantor trust status generally continues after divorce, and the donor may keep paying the income tax on trust income that benefits the former spouse.

Three illustrative scenarios

Illustrative scenario: appreciating business interest. A founder transfers a properly valued, separately owned interest to a SLAT for a spouse and descendants. If the transfer is complete and the donor retains no prohibited enjoyment or control, future appreciation may accrue outside the donor's estate. IRC §§2036 and 2038 are central checks: retained enjoyment, income rights, or a power to alter or revoke can create estate-inclusion risk.

Illustrative scenario: community assets, unclear records. A couple funds a trust from a joint account but cannot establish which funds were separate property. The transfer's characterization and gift consequences are uncertain. Resolve ownership and any required express transmutation before funding, not after the family's records have become a forensic project.

Illustrative scenario: matching trusts. Each spouse creates nearly identical trusts for the other, with similar access and remainder terms. Under Estate of Grace, courts look at whether trusts are interrelated and leave each spouse in approximately the same economic position as if each had created a trust for themselves. Matching paperwork is not the only concern; the actual economic arrangement matters.

A practical decision framework

Before drafting or funding, test the plan against these questions:

• Can the donor fund the trust with assets that are genuinely available for an irrevocable transfer?
• Can the household maintain its lifestyle if the donor cannot access trust principal directly?
• Is the proposed property separate, community, or mixed, and is that documented?
• Are valuation, gift reporting, and any gift-splitting election coordinated?
• Does the spouse-beneficiary have meaningful but appropriately designed access?
• Would two trusts, if contemplated, differ in real economic and dispositive terms?
• Are the existing estate plan and business succession arrangements coordinated?

A gift of this size must be reported on Form 709, generally due April 15 of the following year, with an extension available. The return is where the exclusion is reported and where adequate disclosure under IRC §6501(c)(9) begins the assessment period. A valuation obtained for planning purposes is not automatically sufficient for disclosure.

A SLAT is not suitable simply because a couple has substantial assets. Consider alternatives when the donor needs direct liquidity, ownership records are unresolved, marital circumstances are uncertain, or the family cannot accept irrevocability.

Ten common mistakes

1. Treating the $15 million exclusion as a joint account spouses can freely share.
2. Assuming a SLAT creates a tax result without a completed transfer.
3. Funding with community property before resolving characterization.
4. Treating gift splitting as automatic or consequence-free.
5. Assuming the marital deduction applies to every spouse-beneficiary trust.
6. Keeping practical control that conflicts with the stated transfer.
7. Treating a grantor trust's income-tax status as proof of estate-tax exclusion.
8. Drafting mirror-image trusts without analyzing Grace.
9. Ignoring that divorce can leave the donor paying income tax on trust income that still benefits a former spouse.
10. Failing to revisit old trust terms after the law, assets, or family circumstances change.

Tactical FAQ

Is the $15 million exclusion permanent?

IRC §2010(c)(3), as amended by Public Law 119-21, sets the basic exclusion at $15,000,000 and indexes it for inflation for calendar years after 2025. The 2026 adjustment is zero, so the 2026 amount remains $15,000,000, and the first increase is expected in the 2027 figures. It is permanent under current law, but future Congresses can amend statutes.

Does a couple automatically have a $30 million exclusion?

No. That figure combines two individual $15 million amounts. Each spouse's assets, gifts, prior use of exclusion, and any applicable portability election matter.

Can the donor spouse be a SLAT beneficiary?

Generally, the donor should not retain beneficial access. The trust should be designed and administered so distributions to the donor aren't simply routed indirectly through the beneficiary spouse.

Is a SLAT irrevocable?

Yes. The donor generally gives up the right to revoke the trust and reclaim its assets. Any reserved power must be examined for gift- and estate-tax consequences, including under IRC §§2036 and 2038.

Can a beneficiary spouse receive trust distributions?

The trustee may make distributions if the trust permits them and the applicable distribution standard is met. Access depends on the terms and administration; it is not guaranteed.

What if the beneficiary spouse dies first?

The donor's practical access through that spouse may end. The result depends on the trust's terms and the family's circumstances, so model that outcome before signing.

Can spouses create two SLATs?

They can create separate trusts, but mirror-image arrangements require close review. United States v. Estate of Grace, 395 U.S. 316 (1969), focuses on interrelated trusts that leave settlors in approximately the same economic position as self-beneficiary trusts.

Does gift splitting make a gift tax-free?

No. IRC §2513 can treat a qualifying gift as made one-half by each spouse if requirements are met. It doesn't erase the gift or make the transfer exempt from reporting or other tax rules.

Does the annual gift-tax exclusion automatically apply?

No. Under IRC §2503(b), the exclusion generally applies to gifts of present interests, not automatically to every transfer to a trust. The beneficiary's rights and trust terms matter.

Does a large SLAT gift have to be reported on Form 709?

Yes. A gift of this size must be reported on Form 709, generally due April 15 of the following year, with an extension available. The return is where the exclusion is reported and where adequate disclosure under IRC §6501(c)(9) begins the assessment period. A valuation obtained for planning purposes is not automatically sufficient for disclosure.

Is the marital deduction automatic for a SLAT?

No. IRC §2523 has specific rules, including rules for terminable interests. A spouse-beneficiary trust is not automatically treated as a fully deductible gift to the spouse.

Is a grantor trust the same as an estate-included trust?

No. Income-tax grantor status and estate-tax inclusion are separate classifications. IRC §§671 and 677 govern important grantor-trust income rules; §§2036 and 2038 address certain estate-inclusion risks. IRS Rev. Rul. 2004-64 addresses grantor payment of trust income tax.

Does the 2026–2027 Priority Guidance Plan change SLAT law?

No. It identifies a planned guidance project under §2010. It is not a proposed or final rule and does not itself have authority to change the statute.

Risk Exposure Mapping → Control Architecture → Implementation

Risk Exposure Mapping: Identify current and projected estate exposure, ownership character, prior gifts, liquidity needs, existing trust terms, and dependence on spousal access. Start with the assets and family realities, not the document template.

Control Architecture: Decide what the donor can permanently give up, who may benefit, who will administer the trust, how distributions work, and what happens at death, incapacity, or divorce. A trust is a control system, not a document package.

Implementation: Confirm property character, value and document assets, execute the trust and transfer records, execute and document transfers, coordinate any required Form 709 filing or split-gift election, and review the plan as family facts or law change. Related firm analysis on dynasty trust planning, private placement life insurance, and QSBS planning is available at jamesburnslaw.com/blog, though each addresses different tax rules.

Evaluate your readiness

Use the Risk Exposure Mapping Form and command resource to identify coordination questions in your current plan. Then request a Situation Readiness Briefing to map control, gift, estate-inclusion, California property-characterization, and family-transition exposures. The command resource is also available here.

Resources & Authorities

Primary authorities, reviewed October 9, 2026:

• IRC §2010; Public Law 119-21, §70106: federal basic exclusion.
• IRS Rev. Proc. 2025-32: 2026 basic exclusion amount and annual inflation adjustment.
• IRC §§2501 and 2511; Treas. Reg. §25.2511-2: gift-tax transfers and completion.
• IRC §2513, gift splitting.
• IRC §2503 and IRC §2523: annual exclusion and marital deduction.
• IRC §§2036 and 2038, retained enjoyment and powers.
• IRC §§671, 677, and 672(e): grantor-trust income taxation and spousal attribution.
• IRC §682: repealed rule relevant to post-divorce treatment for instruments executed after December 31, 2017.
• IRC §6501(c)(9): adequate disclosure and gift-tax assessment period.
• United States v. Estate of Grace, 395 U.S. 316 (1969): reciprocal-trust doctrine.
• California Family Code §§760, 850, and 852: community property and transmutation.
• Revenue and Taxation Code §17731: California conformity to federal grantor-trust rules; confirm against the current code.
• FTB Publication 1067 (Fiduciary Income Tax): California fiduciary and grantor-trust income tax guidance.
• Treasury and IRS 2026–2027 Priority Guidance Plan, released September 29, 2026, planned guidance, not law.
• IRS Rev. Rul. 2004-64: grantor payment of income tax attributable to a grantor trust.

Firm resources:

• Estate-planning and asset-protection articles
• Firm command resource

Author, disclaimer & intellectual property

James G. Burns, Esq., LL.M. is an estate-planning attorney with 25 years of experience and a member of STEP. His work focuses on wealth transfer, asset protection, and control architecture for families and business owners.

This article is general information, not legal or tax advice, and does not create an attorney-client relationship. Laws and individual facts matter; consult qualified legal and tax professionals before acting. This is attorney advertising.

The Law Office of James Burns and its methods, marks, and original content are protected intellectual property. No third-party legal or tax advice is represented as the firm's work.