What is a Qualified Domestic Trust (QDOT) and how does it work?
Just like U.S. citizens, permanent legal residents are taxed on assets they own anywhere in the world. In 2007 and 2008, they get an estate tax exemption on the first $2 million ($3.5 million in 2009) of their estate after they die. Unlike citizen spouses, however, non-citizens spouses cannot qualify for the “unlimited marital deduction.” This means if you die first, you won’t be able to leave an unlimited amount of assets to your non-citizen spouse without the imposition of estate taxes. The Qualified Domestic Trust, or QDOT was established as a means allow some benefits of the unlimited marital deduction for bequests to a non-citizen spouse and essentially results in a deferral of estate taxes until the death of the surviving spouse. Your resident-alien spouse is entitled to all the income generated by the assets in the QDOT, but the trustee must be a United States citizen or corporation. Back to the top.
