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Qualified Domestic Trust

When a person's spouse is not a United State's Citizen there is a chance that the estate will not be allowed to enjoy the benefits of the marital deduction. However, a qualified domestic trust can be created to allow the non-U.S. citizen to continue to be supported by the deceased spouse's assets. When a QDOT is set up, the assets placed in it are taxed as part of the deceased spouses estate and do not become a part of the non-citizen's estate. This prevents the estate from avoiding the estate tax altogether which is what would happen if the assets were transferred to a non-U.S. citizen. In this manner, the estate tax is collected and the non-citizen spouse continues to receive support in the form of income from the estate which is only subject to income tax.

Fast Facts

  • The Trustee of a QDOT must be a U.S. Bank if the assets are more than 2 million dollars.
  • The non-U.S. spouse should consult their country of citizenship's laws for passing on property if they feel the need to do so with the remaining income in the trust.

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