In my last blog post I noted that it might be a good time to reconsider discount planning with family limited partnerships (FLP). That thought has only increased over the last few weeks as the chances for tax reform dwindle. Indeed, while political predictions are a fools game, we now have to seriously consider a move left in 2020 and, at best, a stalemate until then. The move left could endanger discount planning again, so the next few years might be a window to make use of this kind of planning.
While this planning can involve transfers downstream via dynastic trusts, it can also involve leveraging the lifetime exemption using FLP discounts via gifts to spousal lifetime access trusts (SLATs). A SLAT is an irrevocable trust benefiting the spouse, and then descendants. Each spouse can create their own SLAT, provided they avoid the reciprocal trust doctrine, and the marital estate can still have use of the gifted assets during their joint lives. In December of 2012, with the risk of the lifetime exemption being reduced, many, many SLATs were implemented.
SLATs raise a number of issues to work through, in addition to the aforementioned reciprocal trust doctrine, but, in the right circumstances, they over an elegant solution that offers a bit of a have your cake and eat it too flair.