Post-Sale Estate Plan: SLAT vs GRAT vs CRT at $20M Net Worth

The day a $20 million business sale closes, the founder's estate-tax exposure goes from zero to approximately $2.4M of federal tax liability (or more, with state tax in MA, OR, MN, NY, or similar). The IRS gives nine months from death to file Form 706 and pay the estate tax — for a family that has been planning charitable giving and trust distributions for decades, the surprise tax bill arrives at a moment of grief and crisis. Three trust structures, properly stacked, eliminate the surprise: the SLAT locks in current exemption against future reduction, the GRAT transfers future appreciation gift-tax-free, and the CRT provides both estate-tax reduction and lifetime income. None of them is the right answer alone. The combination at $20M of post-sale net worth is the standard playbook.

The post-sale estate-tax problem

Federal estate tax under IRC sec. 2001 applies to the value of a decedent's gross estate (sec. 2031), reduced by allowable deductions, with a unified credit equal to the applicable exclusion amount under sec. 2010. The 2026 applicable exclusion is $13.99M per individual.

For a single founder with $20M of net worth:

• Gross estate: $20,000,000
• Applicable exclusion: $13,990,000
• Taxable estate: $6,010,000
• Federal estate tax at 40%: $2,404,000

For a married founder with $20M of net worth (assuming all assets pass to surviving spouse, then to heirs):

• First death: marital deduction under sec. 2056 eliminates federal estate tax. Portability election preserves unused exemption.
• Second death (assuming surviving spouse holds $20M growing to $25M): gross estate $25M; combined exemption $27.98M; no federal estate tax

But the math gets harder if:

• The federal exemption is reduced (TCJA was extended by OBBBA 2026-05-09, but future Congresses can change it)
• The estate grows substantially between first and second death
• The founder lives in a state with its own estate tax (MA $2M, OR $1M, NY $7.16M with cliff, WA $2.193M, etc.)
• Portability is not elected on the first-to-die spouse's estate (the deceased spousal unused exemption is lost forever)

A $20M Massachusetts couple, for example, faces ~$2.9M of MA estate tax at the second death regardless of federal exemption levels, because MA does not have portability and its $2M exemption is a cliff (estates over $2M pay tax on the FULL amount, not just the excess over $2M).

SLAT mechanics: locking in current exemption

A Spousal Lifetime Access Trust is an irrevocable trust funded by one spouse (the donor) primarily for the benefit of the other spouse (the beneficiary), with descendants typically as remainder beneficiaries. The mechanics:

1. The donor spouse transfers assets to the SLAT, using lifetime gift-tax exemption under IRC sec. 2010
2. The gift is a completed transfer for gift-tax purposes — it consumes the donor's exemption
3. Once funded, the SLAT assets (and all future appreciation) are outside the donor's taxable estate forever
4. The beneficiary spouse can receive distributions from the SLAT for health, education, maintenance, and support (HEMS standard), giving the donor indirect access through the marriage
5. The SLAT is structured as a grantor trust under IRC sec. 671-679 during the donor's lifetime, so the donor pays the income tax on trust income (which itself is a tax-free transfer to the trust under Crummey v. Commissioner and related authorities)

The key planning point: if Congress reduces the exemption later (e.g., from $13.99M to $7M), Treas. Reg. sec. 20.2010-1(c) provides anti-clawback protection — the SLAT-funded portion that consumed the higher exemption is not retroactively subject to estate tax. The donor effectively locks in the current high exemption.

Risks:

• Divorce. If the marriage ends, the donor loses indirect access via the beneficiary spouse. The trust continues for the now-ex-spouse's benefit. Some SLATs include a "floating spouse" provision under Estate of Smith that names whoever is the current spouse, but this is risky and the IRS has challenged it.
• Death of beneficiary spouse. If the beneficiary spouse dies first, indirect access ends. The SLAT continues for descendants.
• Reciprocal-trust doctrine. If both spouses create mirror-image SLATs for each other, the IRS can collapse them under United States v. Estate of Grace (395 U.S. 316). Each SLAT becomes includible in the donor's estate. To avoid: substantial differences in beneficiaries, trustees, distribution standards, and timing.
• Inadequate funding. Underfunding the SLAT leaves exemption unused that may be lost if Congress reduces the exemption later. The standard advice for $20M+ households: fund the SLAT to use most or all of the current exemption ($10M-$13M+).

GRAT mechanics: transferring appreciation gift-tax-free

A Grantor Retained Annuity Trust under IRC sec. 2702 lets a grantor transfer appreciating assets to descendants with minimal or zero gift tax. The structure:

1. The grantor contributes assets to a fixed-term irrevocable trust
2. The grantor receives back a fixed annuity payment for a term of years (typically 2-3 years for "short-term GRATs")
3. The annuity is calculated using the IRS sec. 7520 rate at funding
4. If the annuity equals the contribution amount plus the sec. 7520 rate (a "zeroed-out" or Walton GRAT), the gift-tax value of the remainder is zero
5. Any appreciation above the sec. 7520 rate transfers to descendants at the end of the term, free of gift tax
6. The grantor is treated as the owner of the trust under IRC sec. 671 for income-tax purposes during the term (paying income tax on trust earnings is itself a tax-free transfer)

Example: 2-year zeroed-out GRAT at 4.8% sec. 7520 rate, $5M funding:

• Annual annuity = $2.62M (calculated to zero out the gift value)
• Year 1: GRAT receives 12% growth ($5M to $5.6M), pays $2.62M back to grantor; balance $2.98M
• Year 2: $2.98M grows 12% to $3.34M, pays $2.62M back to grantor; balance $720K
• Remainder to beneficiaries: $720K transferred gift-tax-free

If the assets only grow at 4.8% (matching the sec. 7520 rate), no remainder transfers — but the planning cost the grantor nothing. If the assets grow at 20% or 30%, the remainder can be substantial.

Post-sale founders use GRATs primarily for:

• Concentrated acquirer stock with high expected volatility
• Recently-acquired private equity positions
• Pre-IPO equity in next-stage ventures
• Real estate positions in growth markets

Risks:

• Grantor death during term. If the grantor dies before the GRAT term ends, the remaining assets revert to the grantor's estate. The planning fails. This is why 2-3 year GRATs are typical — they minimize the mortality risk.
• Insufficient appreciation. If the asset does not grow faster than the sec. 7520 rate, no transfer occurs. The planning is wasted but not destructive.
• Legislative restriction. The 2021 Build Back Better Act would have imposed a 10-year minimum GRAT term and other restrictions. That legislation did not pass but similar limits could return. Current law allows 2-year minimums.
• Sec. 7520 rate sensitivity. Higher 7520 rates make GRATs less efficient (the annuity hurdle is higher). Low-rate environments favor GRATs.

CRT mechanics: estate-tax deduction plus income

A Charitable Remainder Trust under IRC sec. 664 is a split-interest trust that combines lifetime income with a charitable remainder. The structure:

1. The donor contributes assets to the CRT, taking an income-tax deduction equal to the present value of the charitable remainder interest under sec. 170 (typically 25-40% of contribution)
2. The CRT pays the donor an annual income stream (CRAT: fixed annuity; CRUT: fixed percentage of trust value) for life or a term of years
3. At the donor's death (or end of term), the remainder passes to a qualified charity (or DAF)
4. The contributed asset is removed from the donor's gross estate under sec. 2055, providing an estate-tax deduction for the full charitable remainder

For estate-planning purposes specifically:

• The contribution amount is no longer in the donor's gross estate
• The annuity stream is paid to the donor during life (and to the spouse if a joint-life trust)
• At death, the remainder passes to charity — no estate tax on the remainder
• The income-tax deduction during life provides additional tax savings

For a $20M net worth founder contributing $5M to a 6% CRUT:

• $5M removed from gross estate (federal estate tax saving at 40% = $2M of potential exposure eliminated)
• Annual income stream $300K (growing with trust value)
• Income-tax deduction at funding ~$1.5M (present value of remainder), saving ~$555K of income tax at 37% bracket
• Charitable remainder at death (~$3M-$5M depending on growth)

The combined plan: SLAT + GRAT + CRT at $20M net worth

For a 58-year-old married founder with $20M of post-sale net worth, two adult children, and moderate charitable intent, the standard combination:

Step 1: Fund SLAT at $10M-$12M (lock exemption)

• One spouse (donor) transfers $10M of liquid assets to an irrevocable SLAT for the benefit of the other spouse (beneficiary) and descendants
• Uses $10M of the donor's $13.99M exemption
• SLAT is grantor trust during donor's life; donor pays income tax on trust income
• If exemption is reduced to $7M by future legislation, anti-clawback regulation under Treas. Reg. sec. 20.2010-1(c) protects the SLAT-funded amount
• Estate-tax savings: 40% × $10M = $4M of potential exposure removed (well above the founder's current $2.4M exposure)

Step 2: Stack 2-year zeroed-out GRATs at $3M each cycle

• Donor contributes $3M of concentrated acquirer stock to a 2-year zeroed-out GRAT
• Annual annuity ~$1.57M based on 4.8% sec. 7520 rate
• Expected 12% appreciation transfers ~$430K per cycle to descendants gift-tax-free
• As one GRAT terminates, fund the next 2-year GRAT with the returned annuity (re-investing the appreciation)
• Over 8-10 years, total transferred to descendants: $2M-$4M

Step 3: Fund CRT at $3M for charitable+income

• Donor contributes $3M of appreciated portfolio to a 6% CRUT
• Annual income stream: $180K initially, growing with trust value
• Income-tax charitable deduction at funding: ~$900K (present value of remainder), worth ~$330K of immediate income-tax savings
• $3M removed from gross estate
• Charitable remainder at donor's death (~$2M-$3M): goes to DAF or operating charity

Step 4: Retain $4M in direct ownership

• Liquidity, day-to-day living expenses, tax payments
• Step-up at death under sec. 1014 (basis reset)
• Within the remaining $3.99M of donor exemption ($13.99M minus $10M used by SLAT)

Total after-planning outcome

• SLAT $10M + appreciation (outside estate): ~$15M-$20M at death
• GRAT remainders (transferred to children gift-tax-free): ~$2M-$4M cumulative
• CRT remainder (to charity): ~$2M-$3M
• Retained $4M plus growth (in estate but within exemption): ~$5M-$7M at death
• Total family wealth at donor's death (heirs + retained): ~$22M-$31M depending on growth
• Federal estate tax: $0 (retained assets within remaining exemption)
• Charitable impact: $2M-$3M to charity via CRT remainder

Compared to no planning

• $20M growing to $30M-$35M over 20 years
• Federal estate tax on $30M estate (assume single exemption $13.99M at death, possibly reduced): $6.4M to $9.2M of federal tax
• Plus state tax depending on state
• Net to family: $20M-$25M (vs. $22M-$31M with planning)
• Charity received: $0 (no CRT remainder)

The decision tree: which trust for which situation

Choosing the right combination depends on the founder's specific situation:

• Married with strong family-transfer motive: SLAT primary (locks exemption), GRAT secondary (transfers appreciation), CRT optional (only if charitable intent is meaningful).
• Single with no descendants: CRT primary (charitable remainder), GRAT only if there are designated heirs other than the founder, SLAT N/A.
• Married with charitable intent and no children: CRT primary (lifetime income + remainder to charity), spousal portability for any retained estate, no SLAT/GRAT.
• Married with significant charitable intent + family transfer: SLAT for family ($8M-$10M), CRT for charity ($3M-$5M), GRAT for appreciation transfer.
• State estate-tax exposure (MA, OR, MN, NY, etc.): increase SLAT and GRAT funding to reduce state-taxable estate. Consider state residency change before death if feasible.
• Concentrated post-sale stock: GRAT weighted heavily — the volatility supports the appreciation-transfer strategy.
• Age 60-plus with health flags: shorter GRAT terms (2 years), CRT joint-life with younger spouse, accelerate SLAT funding before age 65 to maximize remaining time for appreciation outside estate.

State-tax interaction

For founders in states with their own estate tax, the planning must address state-level exposure separately. State exemptions and rates:

• Massachusetts: $2M exemption (cliff), 0.8-16% rates
• Oregon: $1M exemption, 10-16% rates
• Minnesota: $3M exemption, 13-16% rates
• Washington: $2.193M exemption, 10-20% rates
• New York: $7.16M exemption (cliff above $7.5M wipes out exemption entirely), 3.06-16% rates
• Hawaii: $5.49M exemption, 10-20% rates
• Illinois: $4M exemption, 0.8-16% rates

For a $20M Massachusetts founder, the MA estate tax on the second-spouse death (no portability in MA) is approximately $2.9M. The SLAT/GRAT/CRT planning that reduces the federal taxable estate also reduces the MA-taxable estate. For founders contemplating retirement-state relocation, moving to a no-state-estate-tax state (FL, TX, NV, WY, TN) before death eliminates state estate tax entirely.

Coordination with other post-sale planning

The estate plan rewrite should integrate with the other post-sale moves:

• State exit (CA/NY/MA to FL/TX/NV). Moves both the income-tax residency AND the estate-tax residency. Combined federal + state estate-tax savings can exceed $4M.
• Roth conversion ladder. Roth-converted balances pass to heirs tax-free under SECURE Act 10-year rule. Coordinate to ensure family inherits Roth dollars (not Traditional).
• Concentration glide path. The SLAT, GRAT, and CRT can hold concentrated stock and execute the glide path inside the trust. Diversification + estate-removal in one move.
• Charitable contribution timing. Pre-sale DAF contributions reduce the post-sale starting balance, lowering the estate-planning burden. Combine with CRT for layered charitable + family transfer plan.
• Life insurance. ILITs (Irrevocable Life Insurance Trusts) outside the estate fund estate-tax payments if the planning is insufficient. For founders with health flags or substantial estate-tax exposure remaining after SLAT/GRAT/CRT planning, ILITs are the backstop.

Key takeaways

• At $20M of post-sale net worth, the founder is approximately $6M above the 2026 federal estate exemption ($13.99M single), exposing the family to $2.4M of federal estate tax — plus state tax in MA, OR, MN, NY, and similar states. The exposure ranges from $2.4M to $5.3M total depending on state.
• A SLAT funded with $10M-$13M of the current exemption locks in the high exemption against future reduction. Anti-clawback regulation under Treas. Reg. sec. 20.2010-1(c) protects the SLAT funding even if Congress lowers the exemption.
• A GRAT under IRC sec. 2702 transfers appreciation above the sec. 7520 rate (currently ~4.8%) to descendants gift-tax-free. Stacked 2-year zeroed-out GRATs transfer $200K-$500K per cycle for highly appreciating concentrated post-sale stock.
• A CRT under IRC sec. 664 provides estate-tax deduction at death plus lifetime income (5-8% annual payout). For founders with charitable intent and retirement-income need, the CRT combines income-tax, estate-tax, and lifetime-income objectives.
• The optimal $20M post-sale plan is usually a combination: SLAT $10M-$13M (lock exemption), GRAT $3M-$8M of stacked cycles (transfer appreciation), CRT $3M-$5M (estate deduction + income), retained $4M-$5M (liquidity). Net family wealth at death typically increases by $2M-$5M versus no planning.
• State-tax interaction matters. MA, OR, MN, NY founders should plan state estate-tax exposure separately and consider relocation to a no-estate-tax state. The post-sale SLAT/GRAT/CRT planning combined with state relocation can save the family $4M-$8M of combined federal + state estate tax on a $20M-plus net worth.