Define: Qualified Domestic Trust

A Qualified Domestic Trust (QDOT) is a specific type of trust that allows a non-U.S. citizen surviving spouse to qualify for the marital deduction for estate tax purposes.

A QDOT is created by a U.S. citizen or resident alien spouse in their will or living trust. It holds assets for the benefit of the surviving non-U.S. citizen spouse, ensuring that estate taxes are deferred until the surviving spouse’s death.

To establish a QDOT, the trust must meet certain criteria, including being irrevocable, having a U.S. trustee, and requiring that at least one trustee be a U.S. citizen or domestic corporation.

The primary purpose of a QDOT is to provide a mechanism for deferring estate taxes on assets passing to a non-U.S. citizen spouse, allowing the surviving spouse to benefit from the marital deduction.

No, a QDOT must be established during the lifetime of the U.S. citizen spouse. It cannot be created after their death.

If the surviving spouse becomes a U.S. citizen, the QDOT requirements are no longer applicable, and the assets held in the QDOT can be distributed to the surviving spouse without any estate tax consequences.

Yes, the assets held in a QDOT can be used for the surviving spouse’s support and maintenance, as long as the distributions are made in accordance with the QDOT rules and regulations.

Yes, failure to comply with the QDOT requirements can result in the disqualification of the trust, leading to immediate estate tax liability on the assets held in the QDOT.

In certain circumstances, a QDOT can be terminated, such as when the surviving spouse becomes a U.S. citizen or passes away. However, the termination process must comply with the applicable tax laws and regulations.

While the primary purpose of a QDOT is estate tax planning, it can also be used to provide ongoing financial support and protection for the surviving non-U.S. citizen spouse, ensuring their long-term financial security.