How to avoid DEATH TAXES - Understanding a SLAT

I "might" not be able to help you avoid death... but I might be able to help you avoid death taxes.

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THERE ARE TWO TAX SYSTEMS IN THE UNITED STATES

1. The Income Tax System – The one that everyone knows about. You make income from work or from an investment or from a pension or from wherever, you pay taxes on that income.

2. The Estate Tax System (death tax) - This is the one that people kind of know exists, but don't like to think about. Honestly, why would you want to... death and taxes? This is the tax system your heirs get to deal with when you pass your assets on after death.

WHY CARE ABOUT A TAX SYSTEM THAT WILL ONLY IMPACT YOU AFTER DEATH?

Because of the positive or negative impact it can have on your posterity.

You get to choose.

THE CURRENT FEDERAL ESTATE TAX EXEMPTION (2023)

$12.92 Million (per person)

What does this mean?

An individual can transfer up to $12.92 Million to their heirs/beneficiaries at death without incurring federal estate tax.

So... if you're married

The exemption is effectively doubled to $25.84 Million

That is a lot of wealth, do i even need to worry about this?

Maybe, maybe not.

I would still think about these things for two reasons:

1. Perhaps you don't exceed these numbers now, but you will in the future as your assets continue to grow.

2. This exemption is set to sunset (expire) on December 31st, 2025

Yes, the exemption is set to change by 2026.

What will it change to?

The Federal Estate Exemption amount will revert to its pre-2018 level, which was $5 million per person. This number will likely be adjusted for inflation.

So... not quite as big of a number as you might have thought.

WHAT IS A SLAT?

Spousal Lifetime Access Trust

A type of irrevocable trust that allows a married couple to transfer assets into it (removing it from your estate), while still retaining access to those assets.

Here is how it works

One spouse transfers assets into the SLAT (removing it from the estate). The other spouse becomes the trustee on the SLAT.

Because one spouse has access, both spouses have access... just do not get divorced.

WHY YOU MIGHT WANT TO CONSIDER A SLAT BEFORE THE FEDERAL ESTATE EXEMPTION SUNSETS

A SLAT would allow you to take advantage of the full $12.92 Million exemption BEFORE it gets cut in half.

How can this be?

HERE IS A SIMPLE EXAMPLE FOR BETTER UNDERSTANDING

1. SCENARIO 1: You have $12.92 Million sitting in an investment account. You move this investment account into a SLAT before the end of 2025, getting it out of your estate and taking advantage of the full exemption.

   Let's say you pass away in 2026... very sad.

   The $12.92 Million in your investment account, PLUS any growth, passes to your posterity Estate Tax Free.

2. SCENARIO 2: You have $12.92 Million sitting in an investment account. You don't do any estate planning.

   Let's say you pass away in 2026... very sad again. It becomes even sadder.

   Roughly HALF of the $12.92 Million in your investment account, PLUS any growth, is subject to Federal Estate Taxes.

What is the federal estate tax?

It's a marginal tax bracket... but anything over $1 Million is subject to 40%... yikes.

Sources & Disclosures found in the video and video link on Youtube