How to Use a Spousal Lifetime Access Trust (SLAT) in Medicaid Planning

Long-term care costs in Connecticut can drain a lifetime of savings faster than most families expect. When one spouse needs nursing home care, the other spouse often faces an impossible choice: spend down assets to qualify for Medicaid or risk financial insecurity. A Spousal Lifetime Access Trust, commonly called an SLAT, offers a strategy that may be useful in some estate and Medicaid planning situations, but it is not a guaranteed Medicaid shield; it requires careful planning and a clear understanding of Connecticut Medicaid rules.

What Is a Spousal Lifetime Access Trust?

A SLAT is an irrevocable trust where one spouse transfers assets for the benefit of the other, removing those assets from the grantor’s taxable estate.

One spouse, called the grantor, creates the trust and funds it with assets. The other spouse becomes the beneficiary and can receive distributions from the trust during their lifetime. Because the grantor has transferred legal ownership of those assets, they are no longer counted as part of the grantor’s estate for federal estate tax purposes.

In the context of Medicaid planning, the goal is different but related. The grantor spouse hopes that, after the Medicaid look-back period passes, those transferred assets will not count toward their Medicaid eligibility determination. That distinction matters enormously, and it is where the details become critical.

How Connecticut Medicaid Rules Apply to SLATs

Connecticut follows federal Medicaid rules, including a 60-month look-back period for asset transfers prior to a nursing home application.

Connecticut Medicaid, administered through the Department of Social Services under Title XIX of the Social Security Act, imposes a 60-month look-back period for long-term care benefits. When a person applies for nursing home Medicaid, the state reviews all asset transfers made within the prior five years. Transfers made for less than fair market value can trigger a penalty period during which Medicaid will not pay for care.

Funding a SLAT is a transfer of assets. If that transfer occurs within the 60-month look-back window before a Medicaid application, the state will scrutinize it. Timing is therefore one of the most important factors in determining whether an SLAT can serve a useful role in a Medicaid planning strategy.

Connecticut also applies specific community spouse resource allowance rules. Under federal law, when one spouse enters a nursing facility, the at-home spouse, called the community spouse, is permitted to retain a protected share of the couple’s combined countable assets. Consult current Connecticut DSS guidance for the applicable Community Spouse Resource Allowance, which is indexed periodically to federal standards. The SLAT structure can interact with these calculations in complex ways, making professional guidance essential.

The Tension Between SLAT Benefits and Medicaid Eligibility

A SLAT that benefits one spouse may still count as an available resource if the Medicaid applicant can access trust distributions indirectly.

This is where SLATs and Medicaid planning diverge from pure estate tax planning. For estate tax purposes, the goal is to remove assets from the grantor’s estate. For Medicaid purposes, the state will examine whether the applicant or the applicant’s spouse has the ability to access the trust assets.

Whether assets in an SLAT are countable for Medicaid depends on the trust terms, the applicant’s access rights, and how state rules evaluate transfers and spousal resource availability. If the beneficiary spouse can receive discretionary distributions from the SLAT, those assets may still be counted as available resources in a Medicaid determination. The trust must be carefully drafted to limit the beneficiary spouse’s access in compliance with Medicaid rules without gutting the trust’s practical benefits.

This tension does not make SLATs useless in Medicaid planning. It does mean that the trust design must serve multiple legal objectives at once, which is a more complex drafting challenge than a standard irrevocable trust used solely for Medicaid purposes.

When a SLAT May Make Sense in Your Plan

SLATs can work well when funded in advance, though Medicaid may still evaluate access rights to trust assets regardless of when the funding occurred.

A SLAT may be a practical option in a broader plan when:

• The couple has substantial assets that also create estate tax exposure.
• The transfer occurs far enough in advance that the look-back period will expire before care is needed.
• The trust is drafted to limit the beneficiary spouse’s access in a manner that complies with Medicaid rules.
• The couple understands and accepts that the grantor spouse will permanently lose direct access to those assets.
• Families considering this strategy should review the current Connecticut DSS guidance and obtain legal advice before funding an irrevocable trust.

For families in Avon and across the greater Hartford area, the combination of real estate values and retirement savings can push estate values into ranges where both estate tax planning and Medicaid planning matter simultaneously. A SLAT, structured correctly, can address both.

The Risks You Cannot Ignore

A SLAT is irrevocable. Once the grantor transfers assets into the trust, that transfer generally cannot be undone. If the couple divorces, the grantor spouse loses access to those assets entirely. If the beneficiary spouse dies first, the grantor spouse also loses access unless the trust includes specific provisions addressing that scenario.

Mutual SLATs, where each spouse creates a trust for the other, carry their own risks. The IRS applies the reciprocal trust doctrine, which can unwind both trusts if they are too similar in structure or timing.

Talk to an Attorney Before You Act

SLATs sit at the intersection of estate tax law, trust law, and Medicaid rules. A misstep in any one of those areas can produce results that are costly and difficult to reverse.

At Law Offices of Ericson, Scalise & Mangan, PC, we work with families throughout Avon and Connecticut on estate planning and Medicaid planning strategies tailored to their specific circumstances. If you are considering an SLAT or want to understand whether it fits your overall plan, call our New Britain office at 860-854-3809 or contact us to schedule a consultation.