What Options Do Business Owners Have for Transferring Their Company Through Succession Planning?
A transfer to a spouse can be simple, but simplicity often gives up control, creditor protection, and tax leverage. A trust structure can preserve indirect access to transferred wealth while still using the transfer tax system more efficiently.
That is why many families consider a spousal lifetime access trust as part of current wealth transfer planning, especially while exemption amounts remain historically high.
A spousal lifetime access trust is an irrevocable trust created by one spouse for the benefit of the other spouse, often with descendants as additional beneficiaries. The donor spouse makes a completed gift to the trust, using available transfer tax shelter, while the beneficiary spouse may receive distributions under the trust terms. Because the transferred property is no longer owned outright by the donor, future appreciation can be removed from the donor’s taxable estate. At the same time, the couple may retain indirect access to trust assets through distributions to the beneficiary spouse, making this structure a common tool in long-term Trust and Estate Planning.
The main advantage over an outright gift is that the donor can shift wealth out of the taxable estate without fully giving up family access to the transferred assets. An outright gift to children or other beneficiaries usually ends the donor’s practical ability to benefit from the property. By contrast, if the donee spouse has a beneficial interest, distributions can still support the household under the trust’s standards. The gift can use the donor’s lifetime gift tax exemption under the unified credit rules, while future growth escapes later estate taxation if structured properly. This combination of tax efficiency and retained flexibility is what makes SLAT estate planning especially attractive.
Two major risks are commonly addressed. First, if each spouse creates a similar trust for the other, the reciprocal trust doctrine may cause the trusts to be uncrossed and pulled back into the estates, so planners usually vary timing, funding, trustees, powers, and distribution standards. Second, indirect access can disappear if the beneficiary spouse dies or the marriage ends. To reduce that risk, documents may permit distributions only under defined standards, give flexibility through independent trustees, and coordinate the trust with broader estate tax exemption and family planning objectives. Careful drafting and administration, including attention to Trusts Accounting, are essential.
Current law makes timing important because the federal estate and gift tax exemption remains historically high. The exemption is $15 million per person for 2026, and legislation enacted in 2025 made that amount permanent, with inflation adjustments beginning after 2026. Although each family’s circumstances differ, making large lifetime gifts may allow taxpayers to use the current exemption while removing future appreciation from their taxable estates, making this an important time to evaluate estate tax planning strategies.
If the beneficiary spouse dies, the trust does not disappear automatically. Instead, it continues under its governing terms for the remainder beneficiaries, often children or further trusts, and the donor spouse generally cannot reclaim the assets because the transfer was completed and irrevocable. If the couple divorces, the former spouse’s beneficial interest may continue or terminate depending on how the instrument is drafted. Planners often address this by defining “spouse” carefully, adding post-divorce termination provisions, or granting powers that allow administrative adjustment after death or divorce. Those contingencies should be addressed expressly when drafting the spousal lifetime access trust document.
A SLAT is often used instead of an outright gift because it can combine completed gift treatment, estate exclusion, and continued indirect family access in a way an outright transfer cannot. Its usefulness depends on careful drafting, especially around spouse-beneficiary contingencies and reciprocal trust concerns. When structured thoughtfully, it can be a highly effective part of wealth transfer planning under the current exemption regime.
For more than four decades, Bennett Thrasher has provided businesses and individuals with strategic business guidance and solutions through professional tax, audit, advisory, and business process outsourcing services. Contact Jonathan Swartz, partner in Bennett Thrasher’s Trusts & Estates Planning, or call us at 770.396.2200.
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