Qualified Domestic Trust (QDOT) Definition and Legal Meaning
On this page, you'll find the legal definition and meaning of Qualified Domestic Trust (QDOT), written in plain English, along with examples of how it is used.
What is Qualified Domestic Trust (QDOT)?
(n) Qualified Domestic trust is the trust formed by a person, by a will or otherwise transferring his property to the trust, in which his wife was named as the beneficiary after his death, especially when the property cannot be transferred by reason of non citizenship of the spouse.
History and Meaning of Qualified Domestic Trust (QDOT)
A Qualified Domestic Trust (QDOT) is a type of trust established by a U.S. citizen, resident alien, or non-resident alien to provide estate tax deferral and benefits for a surviving spouse who is not a U.S. citizen. The QDOT was created by Congress in 1988 for the purposes of solving the estate tax problems of non-U.S. citizen spouses.
Prior to the creation of QDOT, non-U.S. citizen spouses were not eligible to receive unlimited marital deductions for estate tax purposes, which meant that they would be subject to high estate tax liabilities upon the death of their U.S. citizen spouse. However, with the creation of QDOT, the non-U.S. citizen spouse is still eligible to receive a marital deduction if the trust is structured in a specific way.
To qualify as a QDOT, the trust must have at least one U.S. citizen or domestic corporation as a trustee and certain requirements must be met with respect to distribution, withholding, and taxation.
Examples of Qualified Domestic Trust (QDOT)
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John, a U.S. citizen, establishes a QDOT for his non-U.S. citizen wife, Maria, to ensure that she will not be subject to high estate tax liabilities upon his death.
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Sarah, a non-U.S. citizen, inherits her deceased U.S. citizen husband's estate, which includes a QDOT established for her benefit to ensure estate tax deferral and benefits.
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Michael, a U.S. resident alien, establishes a QDOT for his non-U.S. citizen spouse who is residing outside the United States.
Legal Terms Similar to Qualified Domestic Trust (QDOT)
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Marital Deduction - a deduction from the value of an estate, allowed for transfers that are made to a surviving spouse.
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Non-resident Alien - an individual who is not a U.S. citizen and does not meet the substantial presence test for U.S. residency.
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Trust - a legal entity that holds and manages assets on behalf of beneficiaries.