SLATs and Irrevocable Trusts After the OBBBA

Trust Planning in the Post-OBBBA World

The One Big Beautiful Bill Act's permanent $15 million estate tax exemption ($30 million for married couples) fundamentally changes the trust planning calculus for ultra-high-net-worth families.

Before the OBBBA, many families rushed to establish irrevocable trusts to lock in the elevated exemption before the threatened sunset. That urgency has been removed — but for families with estates significantly exceeding $30 million, advanced trust strategies remain essential components of a comprehensive wealth plan.

The question has shifted from 'should we act now?' to 'what is the optimal trust architecture for our family?'

Spousal Lifetime Access Trusts (SLATs)

SLATs have become one of the most widely discussed planning tools for wealthy families, and for good reason. A SLAT allows one spouse to make a gift to an irrevocable trust for the benefit of the other spouse and their descendants, removing the gifted assets from the taxable estate while potentially retaining indirect access.

Key features that make SLATs attractive for nine-figure families:

• Assets transferred to the SLAT are removed from the grantor's taxable estate • The beneficiary spouse can receive distributions for health, education, maintenance, and support • Future appreciation of assets inside the SLAT escapes estate tax entirely • The grantor spouse retains indirect access through the beneficiary spouse

Important limitations and risks:

• In the event of divorce, the grantor spouse may lose access entirely • If spouses establish reciprocal SLATs, they risk IRS challenge under the reciprocal trust doctrine • Once assets are placed in an irrevocable trust, the transfer is generally permanent

SLATs require careful legal drafting and should only be established with experienced estate planning counsel.

Dynasty Trusts

For families thinking in generational terms — as many nine-figure families do — dynasty trusts offer a mechanism to preserve wealth across multiple generations while minimizing transfer taxes at each generational step.

A properly structured dynasty trust can:

• Hold assets outside of any generation's taxable estate • Provide for multiple generations of beneficiaries • Protect assets from creditors, divorce, and litigation • Perpetuate investment discipline and family values through trust governance provisions

The permanent $15 million exemption makes dynasty trusts more accessible: a married couple can fund a dynasty trust with up to $30 million without triggering gift taxes, and all future growth within the trust escapes estate taxation permanently.

Jurisdiction matters significantly — some states permit perpetual trusts, while others impose time limits. The choice of trust situs can have meaningful long-term implications.

Grantor Retained Annuity Trusts (GRATs)

GRATs remain a powerful tool for transferring appreciation to the next generation. The mechanics are straightforward: the grantor transfers assets to a trust and receives an annuity stream in return. If the assets appreciate faster than the IRS's assumed interest rate (the Section 7520 rate), the excess passes to beneficiaries transfer-tax-free.

In the current rate environment, GRATs can be structured with minimal gift tax risk. Rolling GRAT strategies — a series of short-term GRATs — can systematically capture appreciation over time.

GRATs are particularly effective for assets expected to appreciate significantly, such as pre-IPO stock or concentrated equity positions.

Integration with Investment Strategy

Trust design and investment strategy are deeply interconnected for families at this wealth level:

• Asset location decisions — which assets are held inside versus outside of trusts — have significant tax and estate planning implications • The investment mandate of a trust should reflect its purpose: a trust designed to provide income to a current beneficiary has different needs than one designed to maximize growth for future generations • Tax treatment differs: grantor trusts are disregarded for income tax purposes (the grantor pays the income tax, effectively making an additional tax-free gift), while non-grantor trusts face compressed tax brackets

At Altar Rock, we coordinate investment management with trust planning to ensure that portfolio construction serves the family's complete planning architecture — not just its investment objectives.

All trust strategies involve significant legal and tax complexity. Families should work with qualified estate planning attorneys and tax advisors to evaluate whether any of these structures are appropriate for their situation.