Building a Multi-Generational Wealth Transfer Plan Through SLATs and Irrevocable Trusts
The Situation
A couple in their early 60s inherited substantial family wealth and had accumulated a net worth of approximately $50 million. Their retirement spending needs were fully funded, and their primary concern became preserving wealth for future generations while minimizing estate taxes.
Like many affluent families, they faced a common dilemma: they wanted to reduce the size of their taxable estate but were reluctant to part with significant assets for fear of losing flexibility if circumstances changed.
Our Strategy
Working alongside the family's estate planning attorney and tax advisors, we developed a long-term wealth transfer strategy centered around:
- Two Spousal Lifetime Access Trusts (SLATs)
Annual gifting to irrevocable trusts established for their children
Ongoing review of gifting opportunities as tax laws evolve
The couple initially funded:
- $2 million to each SLAT ($4 million total)
- Annual gifts of approximately $500,000 to irrevocable trusts for their children
SLATs provide a unique planning advantage. By creating a trust for the benefit of a spouse, assets and future appreciation can be removed from the taxable estate while retaining indirect access through the beneficiary spouse if needed. Meanwhile, annual gifts to the children's irrevocable trusts further shifted future appreciation outside of the estate while providing asset protection, governance provisions, and long-term family stewardship.
Projected Results
Assuming the initial $4 million contributed to the SLATs grows at 6% annually for 30 years:
Initial contribution: $4 million
Projected future value: approximately $23 million
Assuming annual gifts of $500,000 continue for 30 years and grow at 6% annually:
Future value of annual gifts: approximately $40 million
Combined, these strategies could move more than $60 million outside the taxable estate over time.
At a 40% federal estate tax rate, the potential estate tax savings could exceed:
$63 million × 40% = approximately $25 million
The Outcome
The family established a disciplined framework for transferring wealth across generations while maintaining flexibility and confidence in their own financial security.
Benefits included:
- Removal of future appreciation from the taxable estate
- Indirect access through SLAT design
- Asset protection for future generations
- Significant potential estate tax savings
- A scalable strategy that can grow over time through additional gifting opportunities
Value Delivered
Effective estate planning is often about balancing tax efficiency with flexibility. By combining SLATs with annual gifting to irrevocable trusts, this family created a long-term strategy to preserve family wealth, reduce future estate taxes, and provide lasting benefits to future generations.
The scenario described is hypothetical and is intended solely to illustrate the types of financial planning services that may be provided. It does not represent the experience of any specific client. Actual client experiences and outcomes will vary depending on individual circumstances and it should not be interpreted as a guarantee of future results or client experience. Any interest rate assumptions, rates of return, inflation figures and other costs or figures are hypothetical and for illustrative purposes only.