Estate planning for business owners gets harder the moment real wealth is on the table, and one of the most common mistakes happens before a single form gets filed: assuming any spouse can fund an irrevocable trust for the other spouse's benefit, no questions asked. If the wealth was built during the marriage in a community property state, that assumption can quietly undo the entire structure. The fix is not a different trust. It is getting the ownership and the sequencing right before anyone funds one.
A spousal lifetime access trust, usually called a SLAT, is an irrevocable trust one spouse creates for the benefit of the other spouse and, typically, their descendants. The owner spouse gives up direct ownership of whatever goes into the trust. In exchange, the assets and all future growth on them move outside both spouses' taxable estates, while the beneficiary spouse can still receive distributions during their lifetime under the terms the trust sets.
Business owners reach for a SLAT specifically because so much of their net worth sits in one concentrated asset: an operating company, a post-sale stake, or a single piece of real estate. Diversified portfolios have other tools available. A SLAT is built for the case where the value cannot easily be split up.
In a community property state, most assets built during the marriage belong equally to both spouses, regardless of whose name sits on the account or the cap table. If the business-owning spouse funds a trust for her own benefit using assets she already owns half of by law, the trust can be treated as self-settled. A self-settled trust does not remove the assets from the owner's estate at all, which defeats the purpose of setting it up in the first place.
The workaround is sequencing, not a different trust. The couple's estate attorney first documents which specific assets convert from shared community property into one spouse's sole and separate property, a process generally called a transmutation or a disclaimer agreement. After a waiting period their counsel recommends, so there is a clean paper trail showing the assets are genuinely separate, the now-separate-property spouse is the one who funds the trust for the other spouse's benefit. Ownership on paper, not just intent, is what makes the structure hold up.
Before a concentrated asset moves into a SLAT, many business owners run a piece of it through a family limited partnership first. The couple typically keeps a 1 percent general partner interest, which carries full voting control, and gifts the 99 percent limited partner interest into the trust. Because that limited partner interest has no vote and generally cannot be sold to an outside buyer, a qualified appraisal typically reflects a real discount to its pro-rata share of the underlying assets, often cited in valuation literature in the 20 to 30 percent range, depending on the specific facts and the appraiser's analysis.
That discount matters because gift and estate tax exemption is used based on the appraised value transferred, not the face value of the underlying assets. A smaller appraised value means more of the underlying wealth moves out of the taxable estate per dollar of exemption spent. This rarely works as a set of forms alone, and the IRS looks closely at family limited partnerships for exactly that reason: the partnership has to be run like a real business arrangement, with an actual partnership agreement, separate books, and restrictions the family actually honors.
Consider a hypothetical, not an actual client scenario: a couple built their wealth in a community property state through a single business sale, then moved to a different state where a piece of that wealth, say a six-million-dollar asset, now sits outside the operating business. Because the wealth was earned during the marriage, the owner spouse cannot fund her own trust with it directly. Her spouse becomes the one who contributes it, once it is retitled as his separate property.
That six-million-dollar asset goes into a family limited partnership first. The couple gifts the 99 percent limited partner interest into the SLAT, and a qualified appraisal applies a discount, 25 percent in this illustration, bringing the appraised value to roughly four and a half million dollars. For 2026, the federal gift and estate tax exemption is $15,000,000 per person, or $30,000,000 for a married couple (IRS Rev. Proc. 2025-32); these figures are set by statute, indexed for inflation, and subject to change. In this hypothetical, the couple uses about $4.5 million of that exemption to move roughly $6 million of value out of their taxable estate, leaving more of the exemption available for future planning. This is a simplified illustration for education only, not a projection or a recommendation for any individual's circumstances.
Three questions are worth asking before anyone signs anything. First, was this wealth built during the marriage in a community property state, and if so, has counsel confirmed which assets are actually separate property today? Second, who is qualified to appraise the limited partner interest, and would that appraisal hold up if the IRS asked questions? Third, who administers the partnership day to day, and will the family actually run it like the real business arrangement it needs to be?
These questions rarely have a single generic answer, and no single advisor can answer all three alone. An estate attorney drafts the trust and the partnership documents. A CPA models the exemption use and the ongoing tax filings. An appraiser defends the discount. Dew Wealth Management, The Entrepreneur's Fractional Family Office®, exists to keep those three professionals working off the same set of facts instead of three separate conversations that never quite line up, which is often where a properly designed structure quietly stops working. For more on sequencing a transfer once the structure is in place, see our legacy planning guidance for entrepreneurs, and for the family decisions that come with naming a trustee, our overview of family wealth governance structures.