Qualified domestic trust

Also found in: Acronyms.

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 ?
Question--What are the requirements of a qualified domestic trust (QDOT)?
reform a qualified domestic trust (QDOT) for a noncitizen spouse under IRC section 2056(d) and IRC section 2056A(a); or
However, if the property is held in or transferred to a qualified domestic trust (QDOT) as defined under I.
A major exception to this disallowance rule is provided for property passing from the decedent to a qualified domestic trust (QDT) on behalf of the surviving spouse.
In order to prevent a noncitizen surviving spouse from leaving and removing property from the United States, the unlimited marital deduction is not available, unless: (1) the noncitizen surviving spouse becomes a citizen prior to the time for filing the deceased spouse's federal estate tax return; or (2) the property is passed to a qualified domestic trust (QDOT).
citizen or the property passes to a qualified domestic trust (QDOT).
In some cases, the surviving spouse may further defer payment of estate tax by transferring the assets to a tax-deferred trust called a Qualified Domestic Trust (QDOT).
When a noncitizen spouse is made a designated beneficiary, IRC section 2056(d)(1) provides that no marital deduction would be available unless a qualified domestic trust (QDOT) is used.
citizen is not eligible for the estate tax marital deduction unless the property passes through a qualified domestic trust (QDT).
2056(d)(2), property passes to the surviving spouse in a qualified domestic trust (QDOT) (as defined in Sec.
2056(d)) except for transfers made at death to a Qualified Domestic Trust (QDOT) as defined in IRC Sec.
citizen, the marital deduction may be claimed for property passing to the spouse through a qualified domestic trust.

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