An irrevocable trust created to receive taxable gifts from one spouse to another which utilizes the Applicable Exclusion Amount (AEA) of the donor, thus 'freezing' the gift and grandfathering the amount should tax credits reduce in the future with the donee spouse being a potential beneficiary. Which of the following does this arrangement describe?

An irrevocable trust created to receive taxable gifts from one spouse to another which utilizes the Applicable Exclusion Amount (AEA) of the donor, thus 'freezing' the gift and grandfathering the amount should tax credits reduce in the future with the donee spouse being a potential beneficiary. Which of the following does this arrangement describe?

• A. CRAT - Charitable Remainder Annuity Trust
• B. DING - Domestic Irrevocable Non-Grantor trust
• C. SLAT - Spousal Lifetime Access Trust
• D. BDIT - Beneficiary Defective Irrevocable Trust

Answer: (C)

This arrangement centers on using one spouse’s gift tax exclusion to fund an irrevocable trust for the benefit of the other spouse, while preserving some ability for that spouse to benefit from the trust. A Spousal Lifetime Access Trust is created by one spouse (the grantor) and funded with assets that are removed from the grantor’s estate, using the donor’s Applicable Exclusion Amount. Because the donee spouse is named as a beneficiary, there is potential access to the trust’s benefits during the grantor’s lifetime, which gives the trust its appeal for couples who want wealth to be shielded from estate tax but still available to the spouse. This matches the described setup: the donor uses their exclusion to “freeze” the value in the trust, protecting that amount from future gift or estate tax considerations, with the donee spouse as a potential beneficiary. The other options don’t capture both the irrevocable transfer using the donor’s exclusion and the spouse-centered access that characterizes a SLAT.

This arrangement centers on using one spouse’s gift tax exclusion to fund an irrevocable trust for the benefit of the other spouse, while preserving some ability for that spouse to benefit from the trust. A Spousal Lifetime Access Trust is created by one spouse (the grantor) and funded with assets that are removed from the grantor’s estate, using the donor’s Applicable Exclusion Amount. Because the donee spouse is named as a beneficiary, there is potential access to the trust’s benefits during the grantor’s lifetime, which gives the trust its appeal for couples who want wealth to be shielded from estate tax but still available to the spouse.

This matches the described setup: the donor uses their exclusion to “freeze” the value in the trust, protecting that amount from future gift or estate tax considerations, with the donee spouse as a potential beneficiary. The other options don’t capture both the irrevocable transfer using the donor’s exclusion and the spouse-centered access that characterizes a SLAT.