How to Structure an Irrevocable Trust Before a Tender Offer or IPO: A 2026 Playbook
For couples with concentrated pre-liquidity equity, the irrevocable trust is the structuring tool that captures the pre-event valuation. The most common version for couples is the Spousal Lifetime Access Trust (SLAT). This is the 2026 playbook for thinking about SLATs, when they fit, and when the standard estate plan is enough.
Key takeaways
- An irrevocable trust funded with equity before a liquidity event captures the pre-event valuation against your lifetime federal exemption. Once the event happens, the trust holds the appreciated equity outside your taxable estate.
- A SLAT is an irrevocable trust one spouse creates for the benefit of the other, with optional inclusion of children and descendants. The beneficiary spouse can receive distributions, which gives the couple practical access to the trust assets without bringing them back into the taxable estate.
- The federal exemption under the OBBB Act is $15 million per individual or $30 million per married couple, permanent and indexed for inflation. Couples with combined estates approaching the $30M threshold are the primary audience for SLAT structuring.
- Timing matters. SLATs need to be set up and funded before the liquidity event so the pre-event valuation applies. The structuring takes longer than a standard estate plan, so the conversation should start three to six months before the expected window.
- Neptune's standard $2,500 estate plan does not include SLAT structuring. The standard plan covers the revocable trust and core documents. For SLATs and other tax-driven irrevocable structures, Neptune routes to a specialist.
What a SLAT does
A SLAT is an irrevocable trust created by one spouse (the grantor) for the benefit of the other spouse (the beneficiary). The beneficiary spouse can receive distributions from the trust during their lifetime. After the beneficiary spouse's death, the remainder typically passes to the couple's children or other named beneficiaries.
The grantor uses lifetime federal exemption when funding the trust and files IRS Form 709 to report the gift. The trust assets, including any future appreciation, are then outside the grantor's taxable estate. Because the beneficiary spouse can receive distributions, the couple retains practical access to the trust's value without owning it in either spouse's name for estate tax purposes.
Couples typically design the SLAT as a grantor trust for income tax purposes, meaning the grantor spouse pays the trust's income taxes from outside the trust. Those tax payments function as additional gifts to the trust that do not count against the lifetime exemption, which is a significant compounding benefit over a multi-decade hold. For QSBS-eligible stock, the design shifts because stacking the Section 1202 exclusion requires non-grantor treatment. The attorney needs to map which trusts will be grantor and which will be non-grantor before drafting.
For a pre-liquidity tech employee or founder, the SLAT structure converts illiquid pre-event equity into a tax-sheltered vehicle that captures the post-event appreciation outside the estate.
When SLATs are worth setting up
SLATs fit couples who:
- Hold combined assets approaching the $30 million federal exemption.
- Have a defined liquidity event in the next 12 to 24 months.
- Are comfortable with the irrevocable nature of the trust (once funded, you cannot undo it).
- Have a stable marriage. SLAT distributions go to the beneficiary spouse. In a divorce, the dynamic shifts materially.
SLATs are typically not the right tool for couples who:
- Are well below the federal exemption and have no state-level estate tax exposure.
- Need direct continued access to the equity for personal liquidity.
- Have a near-term liquidity event with no time for proper structuring.
What the structuring captures: a worked example
Consider a couple with $60 million in combined assets, $50 million of which is pre-IPO equity in a company expected to go public in the next 18 months. Without any SLAT structuring, the entire $60 million sits in the couple's taxable estate at death. Against the $30 million combined federal exemption, that leaves $30 million exposed to the 40% federal estate tax, or a potential $12 million federal tax bill at the second spouse's death.
If the same couple structures two reciprocal SLATs and funds each with $15 million of pre-event equity, they use both $15 million lifetime exemptions at the pre-IPO valuation. After the IPO, assume the funded equity triples to a combined $90 million inside the two trusts. That entire $90 million, including the $60 million of post-event appreciation, is now outside the couple's taxable estate. The federal estate tax savings at the 40% rate is roughly $24 million on the appreciation alone, before counting any further growth inside the trusts during the couple's lifetimes.
How to think about the timing
A SLAT needs to be drafted, funded, and operationalized before the liquidity event for the pre-event valuation to apply. The structuring sequence typically runs:
1. Months 3 to 6 before the event. Engage a tax-focused trusts and estates specialist. Discuss the SLAT structure, beneficiary design, and trustee selection. Confirm QSBS eligibility if applicable. Review the latest 409A or comparable valuation.
2. Months 2 to 3 before the event. Draft and execute the SLAT documents. Transfer the equity into the trust. File the gift tax return for the funding.
3. Months 1 to 2 before the event. Confirm the trust is properly funded, the trustee is in place, and any required corporate consents (for stock transfer restrictions) are obtained.
4. At the event. The trust holds the equity through the event. The trust, not the grantor, realizes the post-event appreciation.
5. After the event. The trust holds the proceeds or the publicly traded shares. The trustee handles distributions per the trust terms, and the trust files its own annual income tax return. The grantor's planning team coordinates the SLAT with the broader plan, including any state estate tax exposure and the basis planning for the eventual sale of the trust assets.
The window can compress, but rushed structuring is the leading cause of later challenges. Three months before the announced window is the practical minimum.
How to differentiate two SLATs and avoid the reciprocal trust trap
Reciprocal SLATs (each spouse creating one for the other) are the most common couples structure because they use both lifetime exemptions. The risk under Estate of Grace is that the IRS will treat economically symmetrical SLATs as if each spouse had created their own trust for their own benefit, undoing the estate tax savings. The two trusts need to differ meaningfully across several axes:
- Timing. Sign and fund the two SLATs in different months, not on the same day.
- Trustees. Use different trustees for each SLAT.
- Distribution standards. Vary the discretionary standard. One SLAT might use the HEMS standard; the other might use a different formulation.
- Beneficiary classes. Include different remainder beneficiaries or different inclusion classes for descendants.
- Asset mix and value. Fund the two trusts with different asset types and meaningfully different amounts.
- Powers of appointment. Give one beneficiary spouse a power of appointment that the other does not have.
No single difference is enough. The cumulative effect is what defeats the reciprocal trust argument. A tax-focused specialist with reciprocal SLAT experience handles the design.
Where Neptune fits
Neptune's standard $2,500 estate plan covers the revocable living trust, pour-over wills, healthcare directives, durable powers of attorney, and guardian designations. The standard plan is the foundation for every couple, including those who later add a SLAT.
For SLAT structuring itself, Neptune routes to a tax-focused trusts and estates specialist. The standard plan is not the right tool for irrevocable trust drafting, QSBS stacking, or the technical work of timing a structure to a liquidity event. The right move is to let the specialist handle the SLAT and use Neptune for the foundational documents the SLAT sits on top of.
As the family's planning evolves over the years (children added, asset mix changes, additional liquidity events), Neptune keeps the foundation current alongside the specialist's SLAT work. The partnership is built for the decades after the trust is funded, not just the months around the event.
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Frequently asked questions
Do we both need to set up SLATs for each other?
Couples often set up reciprocal SLATs (each spouse creates one for the other) to maximize the use of both lifetime exemptions. The reciprocal trust doctrine, articulated by the Supreme Court in United States v. Estate of Grace, 395 U.S. 316 (1969), can cause the IRS to disregard the trusts if they are too symmetrical. The drafting needs to differ between the two SLATs in meaningful ways. A tax-focused specialist handles the structuring.
What happens to a SLAT in a divorce?
The SLAT continues to operate per its terms. Distributions to the beneficiary spouse continue to be available. The dynamic gets complicated because the grantor no longer has indirect access through the spouse. This is one of the reasons SLATs fit stable marriages and don't fit couples in transition.
Can the standard Neptune plan ship before the SLAT is drafted?
Yes, and often that's the cleaner sequence. The standard plan establishes the revocable trust, wills, and core documents. The SLAT is then drafted on top by the specialist, with the standard plan's assets coordinated with the SLAT funding. Most couples ship the standard plan two to four weeks before engaging the specialist.
What if the beneficiary spouse dies before the grantor?
The grantor loses the indirect access they had through their spouse. The trust continues for the named remainder beneficiaries, usually the couple's children. This is a real risk both partners should discuss before creating a SLAT, and it is one reason advisors generally recommend the beneficiary spouse take distributions only when truly needed.
Written by
Ronke Oyekunle
Co-Founder & COO, Neptune