QDOT - Trusts for Non-Citizens

Purpose: 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 and the trust assets are likely to be subject to the federal estate tax if the marital deduction is not available. 

The Marital Deduction: This deduction allows transfers of unlimited amounts of assets between spouses at death, but only if they are United States citizens.  The result is that 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 marital deduction only postpones the federal estate tax on the estate, and, in some cases, may cost a married couple additional taxes if there are no other provisions to reduce estate taxes.   The marital deduction is an important estate planning tool, and is useful in deferring taxation possibly for many years after the death of the first spouse.

The Problem for Non-Citizens: If a married couple has an estate that is greater than the $11.58 million estate tax exemption, and one or both of them are not citizens, they need a QDT to avoid estate taxes on the death of the first spouse.  For estates that are less than those amounts, no QDT is needed because no federal estate tax will be due.  In other words, the first spouse to die will use his or her exemption of $11.58 million to transfer his or her estate to the surviving spouse, and the marital deduction will not be used.