A spousal lifetime access trust can be a powerful asset protection strategy for married couples in Maryland when it is structured carefully and used early. Like other planning tools in this area, it works best when it is part of ordinary estate planning rather than a reaction to an existing creditor problem.
The basic SLAT structure is straightforward. One spouse creates an irrevocable trust for the benefit of the other spouse, often with descendants as additional beneficiaries. Because the beneficiary spouse did not create the trust, the trust is generally not treated as self-settled as to that spouse. That matters because Maryland, like most states, is far more protective of third-party trusts than of trusts a person creates for his or her own benefit.
Why a SLAT can help protect assets
Although SLATs are used to lock in high federal estate tax exemptions as a hedge against Congress dropping the exemptions back to its earlier lower levels, they also have an asset protection role. The central asset protection logic of a SLAT is that property transferred to the trust is no longer held outright by either spouse in the ordinary sense. If the structure is done correctly, the beneficiary spouse will still receive distributions under the terms of the trust, but the trust assets are not simply exposed as if they were personal assets held directly by that spouse.
That makes the SLAT useful for couples who want to reduce estate tax exposure, preserve indirect access to wealth during life, and create stronger long-term protection for family assets.
Why Maryland law matters here
Maryland is not generally friendly to self-settled asset protection trusts. A person ordinarily cannot move assets into a trust, keep meaningful benefit or control, and expect Maryland creditors to be shut out. But a SLAT is different because the settlor spouse creates the trust for the other spouse, not for themselves as the immediate beneficiary.
Maryland’s broader trust law also makes the strategy more interesting because Maryland is relatively favorable in its treatment of discretionary trusts and powers of appointment. In the right structure, those doctrines can add flexibility (even naming the receiving spouse as its sole trustee) without automatically destroying the trust’s protective features.
A SLAT is not a free pass
A SLAT is not magic. Timing still matters. Solvency still matters. Documentation still matters. If the trust is funded after creditor pressure is visible, if the transfer lacks economic realism, or if the structure leaves the settlor unable to meet obligations, the planning can still be attacked under fraudulent conveyance principles or in bankruptcy.
That is why a SLAT should be evaluated as part of a broader creditor-risk analysis, not sold as a shortcut around it.
Discretionary trust treatment can strengthen the structure
Maryland also has a comparatively favorable body of law around discretionary trusts. As long as the trustee has discretion to decide whether to make a distribution, a beneficiary’s creditors should not be able to compel distributions. Also Maryland permits the beneficiary to be the sole trustee of their own discretionary trust with the statutory “ascertainable” distribution standards. That is possible because the trustee still has discretion to make or not make a distribution and the beneficiary/trustee is treated as a third-party trustee under Maryland law.
That does not mean every SLAT needs to be constructed in the same way, but it does mean Maryland law gives real support to thoughtful drafting choices that preserve both flexibility and protection.
What happens if the beneficiary spouse dies first
One of the hardest questions in SLAT planning is what happens if the beneficiary spouse dies before the settlor spouse. Maryland law is helpful here because the trust can be designed with a power of appointment to the beneficiary spouse that would permit that spouse to appoint the assets to a trust for the surviving, settlor spouse. If the settlor spouse outlives the beneficiary spouse, it is not treated as a self-settled trust by the survivor because it is created by the exercise of the power. We suggest, however, that the beneficiary spouse not execute their will executing the power on the same day that they receive the SLAT to avoid a suggestion that the structure is part of a locked-in arrangement.
This is one of the places where state-specific drafting really matters. A generic SLAT form is not enough.
When a SLAT is most useful
A SLAT is most useful when a couple wants to transfer appreciating assets out of the taxable estate, preserve access to wealth through the beneficiary spouse, and build long-term protection for descendants or continuing trusts. It can also be attractive where one spouse has materially greater creditor exposure than the other, or where the family wants a structure that can adapt over time rather than forcing outright distributions.
As with other asset protection strategies, the best use case is advance planning, not emergency planning.
Discipline matters more than novelty
The strength of a SLAT does not come from sounding sophisticated. It comes from being implemented at the right time, for real planning reasons, with careful drafting and full awareness of Maryland trust law, creditor law, and bankruptcy risk. A well-designed SLAT can be highly effective. A rushed or overreaching one can fail for the same reasons other aggressive strategies fail.
Go deeper on this topic
Readers looking for a deeper and more scholarly treatment of these topics can consult the Franke Beckett treatise Maryland Lawyer’s Guide to Asset Protection in Estate Planning: An Overview.
Go to the sections most relevant to this page:
- Spousal Lifetime Access Trusts (SLATs)
- Statutory Framework
- Transfer Tax / Marital Deduction Treatment
- Usefulness
Return to Maryland Asset Protection as Part of Estate Planning
