Qualified Domestic Trust (QDOT)

Qualified Domestic Trust (known as a QDT or QDOT) is a type of Trust established for the purpose of permitting the federal estate Marital Deduction for Assets transferred from the decedent’s estate to a surviving spouse who is not a citizen of the United States. The Marital Deduction allows transfers of unlimited amounts of assets between spouses at death. The surviving spouse does not have to pay any tax on the estate of the first spouse to die, provided the surviving spouse is a citizen of the United States. The purpose of a Qualified Domestic Trust (known as a QDT or QDOT) is to preserve the marital deduction when the surviving spouse is not a United States citizen. In order to qualify as a Qualified Domestic Trust, the federal government imposes certain requirements. At least one trustee must be a U.S. citizen or a U.S. bank. If the QDOT holds more than $2 million dollars in cash or property, the trustee must be a U.S. bank. The executor of the decedent’s estate must make an irrevocable QDOT election to qualify for the marital deduction on the federal estate tax return within 9 months from the date of death. Income from this trust can be distributed to the surviving spouse without incurring any estate tax consequences; however, any distributions of principal are subject to the federal estate tax. Upon the death of the surviving spouse and/or termination of the trust, the distributed principal of the trust is subject to federal estate tax.

Category: Trusts