Qualified domestic trust

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Qualified Domestic Trust

A trust into which the trustor deposits funds and other assets to provide for a surviving, non-U.S. citizen spouse while also maintaining control of what happens to those assets after the surviving spouse dies. In a Q-DOT, the trustor names his/her surviving spouse as beneficiary and provides that income and/or principal from the trust shall pass to that spouse upon the trustor's death. This enables the surviving spouse to avoid estate taxes to which the non-American spouse would otherwise be subject. See also: Q-TIP.

Qualified domestic trust (QDOT).

If your spouse isn't a US citizen and your estate is large enough to risk being vulnerable to estate taxes, you can use a qualified domestic trust (QDOT) to allow your spouse to enjoy the benefit of the marital deduction until his or her own death.

In short, the marital deduction means that one spouse can leave the other all his or her assets free of estate tax. The inherited assets become part of the estate of the surviving spouse, and unless the combined value is less than the exempt amount, estate tax could be due at the death of that spouse.

The difference, with a QDOT, is that at the death of the surviving, noncitizen spouse, the assets in the trust don't become part of his or her estate, but are taxed as if they were still part of the estate of the first spouse to die. Income distributions from the trust are subject to income tax alone, but distributions of principal may be subject to estate tax.

References in periodicals archive ?
Establishing qualified domestic trusts (Chapters 24, 20)
Exploring all legislation and regulation in this complex, changing area of taxation, this book covers key topics including: deathbed transfers, charitable trusts, valuation, gifts to minors, unified credit, jointly-held property, proceeds of life insurance, qualified domestic trusts, marital deductions, common disaster provisions, powers of appointment, etc.
Certain trusts, simple trusts, pooled income funds, marital deduction trusts, qualified domestic trusts (QDOT), net income charitable trusts, grandfathered generation-skipping transfer (GST) trusts and qualified subchapter S trusts must determine the amount of income required to be distributed.
The IRS issued final regulations55 governing the income, gift and estate tax consequences of qualified domestic trusts (QDOT's).
Special rules apply to a qualified domestic trust (QDOT); the earliest date on which the decedent's DSUE amount may be included in the applicable exclusion amount of the surviving spouse is the date of the occurrence of the final QDOT distribution, the death of the surviving spouse, or the earlier termination of all QDOTs for that surviving spouse: The decedent's DSUE amount may be applied to the surviving spouse's taxable gifts made in the year of the surviving spouse's death.
section] 2056A to create a qualified domestic trust for an estate of a decedent who died prior to January 1, 2005.
In order to receive a similar benefit of the estate tax marital deduction, the assets must be transferred to a qualified domestic trust (QDOT).
2056(d)) except for transfers made at death to a Qualified Domestic Trust (QDOT) as defined in IRC Sec.

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