Spousal Lifetime Access
Trust (SLAT)
Using Life Insurance
Keep Life Insurance Outside
of Your Estate without Losing Flexibility
AD-OC-834B
Spousal Lifetime
Access Trust
(SLAT)
Using Life Insurance
The Situation
A married couple is considering purchasing a life insurance policy on one spouse’s life but wants
to retain access to the policy’s cash value for future needs, such as providing for their children’s
education or family needs. If the policy is personally owned by either spouse, the death benefit
proceeds will be included in that spouse’s estate and may be subject to estate taxes1 upon his or
her death. If an irrevocable life insurance trust (ILIT) is established and named as owner and beneficiary of the policy, the policy’s death benefit should be able to pass to the heirs estate tax-free.
An ILIT, however, may not provide either spouse with access to the policy’s cash value. There
may be a way to have access to a policy’s cash value while ensuring that the death benefit proceeds are excluded from your estate.
the strategy
A special type of ILIT, called a Spousal Lifetime Access Trust (SLAT), can help keep the death
benefit proceeds outside of your estate and still provide indirect access to the cash value. You,
with the help of an attorney, establish the SLAT. The SLAT, like all ILITs, is irrevocable. You
then gift separate property funds to the SLAT. Whether the gifts to the SLAT are subject to gift
tax depends on your ability to make annual exclusion gifts and/or use your lifetime gift tax exemption amount. The SLAT trustee2 purchases a life insurance policy on your life using these gifts.
The SLAT is the owner and beneficiary of the policy. During your lifetime, the terms of the SLAT
will give the trustee of the SLAT the discretion to take loans and withdrawals, which may be
income tax-free if within limits and up to basis, from the policy’s cash value.3 If the SLAT has no
other taxable income, the trustee, within his or her discretion, may then make income tax-free and
gift tax-free distributions to your spouse.
What is Accomplished
Indirect Access to Cash Value – The terms of the SLAT allow the trustee to make distributions
to the non-grantor spouse. This provides the non-grantor spouse with indirect access to the life
insurance policy’s cash value.
Estate Tax-Free Death Benefit Proceeds – If the SLAT is properly drafted and funded with the
grantor spouse’s separate property, the life insurance policy’s death benefit proceeds should
pass to the SLAT free from estate and income* taxes. The SLAT trustee may then make
distributions to the SLAT beneficiaries in accordance to the terms of the SLAT.
Planning Flexibility – A couple using a properly drafted and funded SLAT in their estate planning may insulate the life insurance death benefit proceeds from estate taxes and still provide
the couple indirect access to the life insurance policy’s cash value for other family needs.
* For federal income tax purposes, life insurance death benefits generally pay income tax-free to beneficiaries pursuant
to IRC Sec. 101(a)(1). In certain situations,however, life insurance death benefits may be partially or wholly taxable.
Situations include, but are not limited to: the transfer of a life insurance policy for valuable consideration unless the
transfer qualifies for an exception under IRC Sec. 101(a)(2) (i.e. the “transfer-for-value rule”); arrangements that lack
an insurable interest based on state law; and an employer-owned policy unless the policy qualifies for an exception
under IRC Sec. 101(j).
See endnotes on page 4.
Insurance products are issued by Pacific Life Insurance Company in all states except New York,
and in New York by Pacific Life & Annuity Company. Product availability and features may vary by state.
Investment and Insurance Products: Not a Deposit — Not FDIC Insured
— Not Insured by any Federal Government Agency — No Bank Guarantee — May Lose Value
1
Create SLAT
Spousal Lifetime Access Trust
2
3
Gift of
Separate
Property
Premiums
5
Death
Benefit
Insured/Grantor
4
6
Distributions
SLAT Beneficiaries
Life Insurance Policy
Lifetime
Distributions to
Non-Insured Spouse
Non-Insured Spouse
1 Create SLAT: With the help of an attorney, insured/grantor creates a Spousal Lifetime Access
Trust (SLAT).
2Insured/Grantor: Insured/grantor gifts separate property funds to the SLAT to help fund the
payment of the life insurance policy premiums. This gift may be subject to gift tax depending on the insured’s/grantor’s use of his or her annual exclusion gifts and/or lifetime gift tax
exemption amount.
3SLAT: Trustee of the SLAT purchases a life insurance policy insuring insured’s/grantor’s life
and the SLAT becomes the owner and beneficiary of the life insurance policy.
4 Non-Insured Spouse: During the insured’s/grantor’s lifetime, the trustee of the SLAT has the
discretion to take loans and withdrawals, which may be income tax-free if within limits and up
to basis, from the policy’s cash value.3 Generally, assuming no other trust taxable income, the
trustee, at his or her discretion, may then make income tax-free and gift tax-free distributions to
the non-insured spouse.
5 Death Benefit Proceeds Paid to SLAT: At the insured’s/grantor’s death, the SLAT should
receive the life insurance death benefit proceeds free from estate and income* tax.
6 SLAT Beneficiaries: The SLAT trustee may make distributions to the SLAT beneficiaries
according to the terms of the SLAT.
* For federal income tax purposes, life insurance death benefits generally pay income tax-free to beneficiaries pursuant to IRC
Sec. 101(a)(1). In certain situations, however, life insurance death benefits may be partially or wholly taxable. Situations
include, but are not limited to: the transfer of a life insurance policy for valuable consideration unless the transfer qualifies
for an exception under IRC Sec. 101(a)(2) (i.e. the “transfer-for-value rule”); arrangements that lack an insurable interest
based on state law; and an employer-owned policy unless the policy qualifies for an exception under IRC Sec. 101(j).
This material is not intended to be used, nor can it be used by any taxpayer, for the purpose of avoiding U.S. federal,
state or local tax penalties. This material is written to support the promotion or marketing of the transaction(s) or matter(s)
addressed by this material. Pacific Life, its distributors and their respective representatives do not provide tax, accounting
or legal advice. Any taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor.
1 According to the American Taxpayer Relief Act of 2012, the federal estate, gift and generation skipping transfer (GST) tax exemption amounts are all $5,000,000
(indexed for inflation effective for tax years after 2011); the maximum estate, gift and GST tax rates are 40%.
2 The trustee appointed should not be the insured or the insured’s life insurance producer. A life insurance producer who is paid a commission on the sale of a life
insurance policy represents both his or her personal interest and the interests of the trust, creating a conflict of interest.
3 Tax-free income assumes, among other things: (1) withdrawals do not exceed tax basis (generally, premiums paid less prior withdrawals); (2) policy remains in
force until death; (3) withdrawals taken during the first 15 policy years do not occur at the time of, or during the two years prior to, any reduction in benefits; and
(4) the policy does not become a modified endowment contract. See IRC Secs. 72, 7702(f)(7)(B), 7702A. Any policy withdrawals, loans and loan interest will reduce
policy values and may reduce benefits.
The Power To Help You Succeed
Spousal Lifetime
Access Trust
(SLAT)
This fact finder is provided to help you and your life insurance producer better understand your
goals and objectives. Please return the information to your life insurance producer and not to
Pacific Life as we cannot and do not provide financial, legal or tax advice.
Using Life Insurance
Vital Information
Insured’s Name: ________________________________________________________________ Date of Birth: _________________________
Spouse’s Name:_________________________________________________________________ Date of Birth: _________________________
Address:_____________________________________________________________________________________________________
Total Gross Estate Value:_______________________________________________________________________________________
Life Insurance Death Benefit Need:_______________________________________________________________________________
Illustrate Level Death Benefit:___________________________________________________________________________________
Premium Payment Mode:_____________________________ Solve? __________________ Anticipated Years to Pay:_____________________________ OR Amount?__________________
Hypothetical Earnings Rate (if Variable): %____________________
Life Insurance Product to Illustrate:_______________________________________________________________________________
Additional Notes
Life Insurance Producer’s Name: ____________________________________________________________________ Date: ________________
Pacific Life Insurance Company
Newport Beach, CA
(800) 800-7681 • www.PacificLife.com
Pacific Life & Annuity Company
Newport Beach, CA
(888) 595-6996 • www.PacificLife.com
Pacific Life refers to Pacific Life Insurance Company and its affiliates, including Pacific Life & Annuity Company. Insurance products are
issued by Pacific Life Insurance Company in all states except New York and in New York by Pacific Life & Annuity Company. Product
availability and features may vary by state. Each insurance company is solely responsible for the financial obligations accruing under the
products it issues. Insurance products and their guarantees, including optional benefits and any fixed subaccount crediting rates, are
backed by the financial strength and claims-paying ability of the issuing insurance company, but they do not protect the value of the
variable investment options. Look to the strength of the life insurance company with regard to such guarantees as these guarantees
are not backed by the broker-dealer, insurance agency or their affiliates from which products are purchased. Neither these entities nor
their representatives make any representation or assurance regarding the claims-paying ability of the life insurance company. Variable
insurance products are distributed by Pacific Select Distributors, Inc., (member FINRA & SIPC), a subsidiary of Pacific Life Insurance
Company, and an affiliate of Pacific Life & Annuity Company, and are available through licensed third-party broker-dealers.
Please Note: This brochure is designed to provide introductory information in regard to the subject matter covered.
Neither Pacific Life nor its representatives offer legal or tax advice. Consult your attorney or tax advisor for
complete up-to-date information concerning federal and state tax laws in this area.
Life Insurance Producer’s Name
State Insurance License Number
(or affix your business card)
AD-OC-834B
15-22723-073/13