The honest default
Start with the number that decides everything. The federal estate tax only applies above the basic exclusion, which for 2026 is $15,000,000 per person — $30,000,000 for a married couple who plan for portability (IRC § 2010(c)(3)). If your entire estate, including the life-insurance death benefit, sits comfortably below that, you have no federal estate-tax problem — and an ILIT, or any of the trust structures below, is machinery for a problem you don’t have.
Owning the policy outright
The simplest structure is to own the policy yourself and name your beneficiaries. It is free, flexible, and fully under your control — you can change beneficiaries, borrow against the cash value, or cancel the policy at any time. The only downside is estate-tax inclusion: because you hold incidents of ownership, the death benefit is part of your taxable estate (IRC § 2042). If you are under the exclusion, that inclusion costs you nothing — the estate owes no tax regardless. Owning outright also keeps other assets in your estate, where they receive a date-of-death basis step-up (IRC § 1014) that trust-held assets outside the estate generally do not — a point that matters more for appreciating assets than for an insurance benefit, which is already income-tax-free.
A beneficiary designation
Naming beneficiaries on the policy is essential no matter what — it lets the proceeds pass directly to the people you choose without going through probate. But there is a persistent myth worth killing: naming your children (rather than your estate) as beneficiaries does not keep the death benefit out of your taxable estate. What determines estate inclusion is who owns the policy, not who collects on it (§ 2042). A beneficiary designation solves probate; it does not solve the estate tax. If you have an estate-tax problem, only moving ownership — an ILIT — addresses it.
The SLAT
A spousal lifetime access trust, or SLAT, is a different answer to a related problem. It is an irrevocable trust one spouse funds for the benefit of the other (and often the children), using the donor spouse’s gift and estate exclusion. The gift is complete for transfer-tax purposes (IRC § 2511, § 2512), so the assets — and their future growth — leave the donor’s estate, while the beneficiary spouse’s access gives the couple indirect use of the money. “SLAT” is a planning label, not a statutory term; the mechanics are ordinary gift and exclusion rules.
The comparison, side by side
| Structure | In your taxable estate? | Control / access | Who it’s for |
|---|---|---|---|
| Own the policy yourself | In your taxable estate — you hold incidents of ownership (§ 2042). Irrelevant if you're under the exclusion; costly if you're over it. | Full control. Change beneficiaries, borrow against it, cancel it. | Most families, whose estate is under the $15M exclusion. |
| Beneficiary designation only | Still in your taxable estate if you own the policy — naming beneficiaries does not remove it (§ 2042). It only avoids probate on the proceeds. | Full control of the policy; the form directs who collects. | Anyone who wants proceeds to skip probate — which is almost everyone. |
| ILIT | Out of your taxable estate — the trust owns the policy and you hold no incidents of ownership. | None over the policy. Irrevocable; a trustee (not you) administers it. | Estates near or above the exclusion, or with state estate-tax exposure. |
| SLAT (for a spouse) | Out of the donor spouse's estate — a completed gift using the donor's exclusion (§§ 2511–2512, 2010). | Indirect access through the beneficiary spouse — which ends on divorce or that spouse's death. | Couples facing an estate-tax problem who want to keep indirect access to the gifted assets. |
Estate inclusion turns on ownership (§ 2042) and the exclusion (§ 2010(c)(3)); the SLAT rows rest on completed-gift treatment (§§ 2511–2512) and the reciprocal-trust doctrine of Estate of Grace. This is a map of the trade-offs, not advice on which applies to you — that depends on your estate’s size, your state, and your goals.
Read this table against your own number. If your estate is under the exclusion, the first two rows are almost certainly your answer, and the ILIT pillar exists mostly to help you confirm you don’t need the third. If you are near or above it, the ILIT and the SLAT are worth a real conversation with a qualified estate-planning attorney.
Sources & methodology
Methodology & sources
Every legal claim is cited in place to the Internal Revenue Code or the Supreme Court, linked to Cornell’s Legal Information Institute: estate inclusion by ownership (§ 2042), the basic exclusion (§ 2010(c)(3)), the basis step-up (§ 1014), completed-gift treatment (§§ 2511–2512), and the reciprocal-trust doctrine (Estate of Grace, 395 U.S. 316). Re-verified at least annually and on any change in law — see our editorial standards.
Educational only, not legal or tax advice; not yet reviewed by an outside attorney. When a licensed trust-and-estate attorney reviews this page, the reviewer will appear in the byline.
Last verified July 19, 2026.