SLAT Trust After the Permanent $15M Exemption: What Still Works

The deadline is gone: what the text says

Most SLAT pages still open with a countdown. The text we read does not support one. This is the whole change, line by line.

Two limits on the word “permanent.” It means the statute has no end date; Congress can change it, as our federal estate tax exemption guide lists. And the regulation at 26 CFR 20.2010-1(c) says that where the exclusion allowable on the date of a gift exceeds the one at death, the estate’s credit is based on the amounts used for the gifts. That rule was written for a falling exclusion and is the reason a completed gift still has a federal logic when there is no deadline. For a couple under $30,000,000 in a state with no estate tax, the tables below show no tax removed.

What this page adds to the ILIT guide

Our irrevocable life insurance trust guide already explains the four Code rules that define a SLAT: the gift uses exemption because the spouse’s interest is terminable (section 2523(b)(1)), the donor must not keep the income or the power to change the trust (sections 2036 and 2038), the spouse must not hold a general power (section 2041) and the reciprocal trust doctrine. We do not repeat them. This page covers what that section cannot:

What leaves the estate (our arithmetic)

The assumptions, so the numbers can be checked. A married couple owns the whole estate; one spouse gives half of it to a SLAT (the Code sets no ratio; half is our choice for the table), no gift tax is due because the gift is below $15,000,000, and the other spouse is the beneficiary. Everything else passes to the survivor, who dies later, and portability is elected, so the federal exclusion available is $30,000,000 less the gift. State figures use the estate at today’s values, with the whole estate in the state, no debts or deductions, and treat the figure as the state taxable estate. Oregon uses the ORS 118.010(4) table; Washington uses the schedule for deaths on or after July 1, 2026 and the $3,000,000 exclusion. These are formulas applied to published tables, not a forecast.

In a state with no estate tax, the federal column is the whole story, and it is zero. That is the correction to the old pitch: below $30,000,000 for a couple, a SLAT removes no federal tax today.

Growth is the other argument for a gift, because section 2001(b) adds a gift to the tax base at its value when given, while what the trust earns afterwards is outside both estates. To test it, grow every estate for 20 years at 3% after inflation (1.03 to the 20th power is 1.8061), keep the combined exclusion at a constant $30,000,000 because it is indexed (Rev. Proc. 2025-32, section 2.14), and count the gift at face value. The tax is 40% of the excess over the exclusion (section 2001(c)).

For the $20,000,000 couple the base with a SLAT is $18,061,112 plus the $10,000,000 gift, or $28,061,112, below $30,000,000. The same growth assumptions say nothing about what a state with a low threshold would do to the larger estate, because the Oregon table has no indexing in the text we read and the Washington 2027 exclusion is unsettled (see our Washington guide). The gift also uses part of the donor’s $15,000,000; the table leaves a smaller margin for any other gift. The state mechanics are in our Oregon and Washington guides.

Which states take the gift back

A state without a gift tax can still count the gift at death. These are the six rules we read in the statutes and agency pages, plus the two states used above.

The last two rows are an absence in the documents we read, not a statement about every provision. Our states guide, Minnesota guide and New York guide give the rest.

Divorce, an early death and the other ways it fails

Grace, in detail

The Supreme Court case is about two trusts signed on December 15 and December 30, 1931, by a husband and wife, drawn up in a plan to create additional trusts “before the advent of a new gift tax expected to be enacted the next year.” The Court held that application of the doctrine “requires only that the trusts be interrelated, and that the arrangement, to the extent of mutual value, leaves the settlors in approximately the same economic position as they would have been in had they created trusts naming themselves as life beneficiaries.” It also said “Nor do we think it necessary to prove the existence of a tax-avoidance motive” and “It is no answer that the transferred properties were different in character.” The wife’s trust fund was included in the decedent’s estate.

What the opinion does not give is a safe harbor: the text we read sets the test as interrelation plus economic position and names no number of days, dollar difference or term that avoids it. A couple that wants two SLATs is asking a lawyer how far apart in time, assets and terms two trusts must be, and the answer is judgment, not a table.

Income tax and basis

Because income can go to the donor’s spouse, section 677(a)(1) makes the donor the owner of the trust for income tax, so the trust’s income, deductions and credits are on the donor’s return (section 671). Rev. Rul. 2004-64 holds that the donor paying that tax is not a gift. The trust’s assets, however, keep the donor’s basis: section 1015(a) says the basis of property acquired by gift is “the same as it would be in the hands of the donor,” and Rev. Rul. 2023-2 holds that assets of a grantor trust that are not in the gross estate get no adjustment under section 1014 at death. Section 1014(b)(9) gives a new basis only to property “required to be included” in the gross estate.

Our arithmetic: a rental worth $4,000,000 with a $1,000,000 basis, given to a SLAT, is worth $7,224,445 after 20 years at 3% real growth (1.8061 times $4,000,000). The trust’s basis is still $1,000,000, so a sale carries $6,224,445 of gain. Held in the estate to death, the same building would have a basis equal to its value then and no gain on an immediate sale. The tax rates for that gain are on our capital gains guide and the trade-off is the subject of our step-up in basis guide. The substitution power in Rev. Rul. 2008-22 is the usual way a drafter plans around it; it is for the lawyer, not for this page.

Rental property, fund interests, Form 709 and GST

A gift to a SLAT is reported on Form 709, due April 15 of the year after the gift (Instructions for Form 709 (2025); for a 2026 gift, April 15, 2027). The instructions say a gift to a spouse of a terminable interest must be reported on Schedule A, and that, to start the statute of limitations, the gift must be adequately disclosed: for a gift in trust, that includes the trust’s EIN and a description of its terms, and either a qualified appraisal or a detailed description of the valuation method. If the value includes a discount, including for a fractional interest in real estate, the answer at the top of Schedule A is Yes and an explanation is attached. Our Form 709 guide for illiquid real estate interests covers the valuation side for LLC units, non-traded REIT shares and tenancy-in-common interests.

Gift splitting is of little use to a SLAT. Regulation 25.2513-1 makes the consent effective for the part given to third parties “only insofar as such interest is ascertainable at the time of the gift and hence severable from the interest transferred to his spouse,” and the donor’s spouse is the beneficiary here.

GST: section 2632(c) allocates unused GST exemption to an indirect skip to a “GST trust,” a trust that could have a generation-skipping transfer for the transferor, unless listed exceptions apply, and the donor may elect out. Only the donor is the transferor for a gift (section 2652(a)(1)(B)). A SLAT that can reach grandchildren can therefore use the donor’s $15,000,000 GST exemption without a separate step; see our dynasty trust guide.

What a reader can do with this

What the documents let you check first:

• Compute the state number, not the federal one. If your state is not in the table of states above, the federal result for a couple under $30,000,000 is zero today. Add the home, rentals, fund and LLC interests, retirement accounts and life insurance you own.
• Check the add-back. If you live in Minnesota, New York, Maine, Connecticut, Hawaii or Illinois, read the rule before counting any saving, and see how many years you would have to survive after the gift.
• List what you would give. The trust takes the donor’s basis. Write each asset’s basis and value; high-basis assets and cash do not carry the cost that a $1,000,000-basis building does.
• Ask what happens in a divorce and on the death of your spouse, in writing, with the drafting lawyer, because the Code does not answer it.
• If both spouses want a trust, put the Grace test to the lawyer before signing either.

The decision, and who makes it. A SLAT is a trust instrument drafted by an estate-planning attorney; the gift tax return is prepared by that attorney or a CPA; the building, the fund interest and the cash the household needs afterwards are part of a plan a financial adviser can model with retirement income. Nothing here is a recommendation to create one.

This is analysis of public documents, not investment, legal or tax advice.

FAQ

Sources, read and saved on October 21, 2026: 26 U.S.C. 671, 672, 677, 682, 1014, 1015, 2001, 2010, 2503, 2523, 2632 and 2652, United States Code 2024 edition (govinfo.gov); Public Law 119-21, section 70106 (govinfo.gov); Rev. Proc. 2025-32 (irs.gov); 26 CFR 20.2010-1, 20.2036-1 and 25.2513-1 (eCFR, as of October 1, 2026); Rev. Rul. 2004-64 (Internal Revenue Bulletin 2004-27), Rev. Rul. 2008-22 (Internal Revenue Bulletin 2008-16) and Rev. Rul. 2023-2 (irs.gov); United States v. Estate of Grace, 395 U.S. 316 (1969) (Cornell Legal Information Institute copy); Instructions for Form 709 (2025) (irs.gov); Minnesota Statutes 291.016; New York Department of Taxation and Finance estate tax page; 36 M.R.S. 4102; Connecticut General Statutes chapter 217; Hawaii Form M-6 instructions (Rev. 2025); Illinois Attorney General estate tax fact sheet; ORS 118.010 and the 2026 Form OR-706 instructions (Oregon Department of Revenue); RCW 83.100.020 and Chapter 209, Laws of 2026. Shares, tax figures and worked examples are our arithmetic, with the assumptions stated. This is analysis of public documents, not investment, legal or tax advice.