Let’s face it: nobody wants to think about estate planning. It’s like eating vegetables or hitting the gym daily - you know it’s good for you in the long run, but it’s not always fun. But when you’ve amassed significant wealth, like my client, Dr. Knife, the states are incredibly high.
Dr. Knife, a surgeon, amassed a $100 million net worth from a practice he spent over a decade building. His practice alone is valued at $50 million, and he generates $10+ million in annual income - as astounding figure.
Here’s the problem: if he does nothing and an acute myocardial infarction (MI) suddenly takes him, his estate will face a huge tax bill. The federal estate tax exemption shields a certain amount (currently about $14 million per person, or $28 million for a married couple like Dr. Knife). Anything above that is taxed at a top rate of 40%.
For Dr. Knife, that would mean, roughly $70 million of his estate would be subject to the tax, resulting in a staggering $28 million going straight to the Uncle Sam. That’s a huge chunk of his life’s work disappearing in taxes, a thought that would make him rise up from the grave and say, “No way, Jose!”
The Power of a SLAT: How It Works
One of Dr. Knife’s solutions was to create a Spousal Lifetime Access Trust (SLAT). This is an irrevocable trust, used by married couples to protect assets from estate taxes. The primary goal is to transfer assets out of one spouse’s taxable estate while still allowing the other spouse to benefit from them.
What is a taxable estate? It is the total value of everything you own at death, from real estate and stocks to crypto and cash. A primary goal of estate planning is to reduce the size of the taxable estate since the estate tax is exempt only up to the lifetime gift and estate tax exemption amount, which is about $14 million per person in 2025. That amount can be reduced by making large gifts during one’s lifetime.
Here’s what Dr. Knife did:
He transferred $14 million of real estate with high growth potential into the SLAT. This was a taxable gift that used up his lifetime exemption. In doing so, he achieved a huge win: those assets - and all of their future appreciation - are now outside his taxable estate and safe from the 40% estate tax.
His spouse, Mrs. Knife, was named the trustee, with the power to manage the assets and distribute money to the beneficiaries for their health, education, maintenance and support. This is where the “lifetime access” part of the SLAT name comes in - it acts like a family financial bucket. To add even more flexibility, the trust allows his spouse to withdraw up to 5% of the assets annually.
Because the real estate is income-generating, the SLAT now produces over $700,000 in annual income, which can be used to fund the family’s lifestyle for multiple generations without ever touching the principal. Nice!
Why It’s More Than Just a Tax Dodge
This isn’t just about avoiding taxes; it’s about legacy planning. This super-wealthy use a variety of tools like SLATs, family foundations, and charitable remainder trusts to ensure their wealth provides for their family’s future and supports the causes they believe in.
If Dr. Knife had not nothing, $28 million would have gone to the government in a form of estate tax. Instead, through smart estate planning, he secured his family’s future for generations while also funding his philanthropic goals.
Final Thoughts
Estate planning may not be glamorous, but it’s a crucial step to protect what you’ve worked hard to build. Just like healthy habits, it pays dividends, giving you peace of mind and creating a lasting legacy for your loved ones. The ultra-wealthy don’t leave this to change, and you shouldn’t either.
Looking for a referral? Check out Dr. Klaus Gottlieb, A GI-doc turned California estate/tax attorney who understands the stakes of both health and wealth.
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