Qualified Domestic Trust (QDOT) Structures for Non-U.S. Spouses

 

A four-panel comic strip explains how Qualified Domestic Trusts (QDOTs) help non-U.S. spouses. In the first panel, a worried man says his spouse isn’t a U.S. citizen and asks about estate taxes. In the second, a woman explains that a QDOT defers taxes, requires a U.S. trustee, and distributes income. In the third, the man reassures the spouse that their inheritance is protected, and she replies in relief. In the final panel, the man proudly announces they set up a proper QDOT, holding a sign that says “QDOT Planning.”

Qualified Domestic Trust (QDOT) Structures for Non-U.S. Spouses

When a U.S. citizen passes away leaving a large estate to a non-U.S. spouse, significant estate tax implications arise.

To bridge this legal and financial gap, the IRS created a solution: the Qualified Domestic Trust, or QDOT.

This tool allows surviving non-citizen spouses to defer estate taxes while ensuring compliance with U.S. tax law.

๐Ÿ“Œ Table of Contents

๐Ÿ›️ What Is a QDOT?

A Qualified Domestic Trust (QDOT) is a legal trust designed to defer estate taxes when a U.S. citizen leaves assets to a non-citizen spouse.

Because non-citizen spouses don’t qualify for the unlimited marital deduction, the QDOT acts as a tax-bridge recognized by the IRS.

Assets placed into a QDOT are not immediately taxed, allowing the surviving spouse to access income while principal is protected under strict guidelines.

๐Ÿงพ Why Non-U.S. Spouses Need a QDOT

If a U.S. citizen dies and leaves more than the estate tax exemption limit to a non-U.S. spouse without a QDOT, the estate could face a 40% tax rate.

This tax burden can significantly erode the inheritance intended for the surviving spouse.

A QDOT helps preserve the estate’s value while still complying with U.S. estate tax laws.

๐Ÿ“œ QDOT Requirements Under U.S. Law

To qualify, the QDOT must meet several IRS requirements:

  • At least one trustee must be a U.S. citizen or a U.S. corporate fiduciary.

  • The trust must prohibit principal distributions unless the trustee can withhold U.S. estate tax.

  • The trust must be irrevocable and filed on time after the decedent’s death.

Failure to meet any requirement could trigger immediate taxation.

๐Ÿ“ˆ Planning Benefits of a QDOT

Using a QDOT gives couples more flexibility in cross-border estate planning.

Benefits include:

  • Deferral of estate taxes until the surviving spouse withdraws principal

  • Access to income generated by trust assets

  • Time for the spouse to seek U.S. citizenship (and possibly eliminate tax later)

QDOTs are especially useful in international marriages where one partner is not yet a U.S. citizen at the time of death.

๐Ÿ’ก Conclusion

Qualified Domestic Trusts are an essential estate planning tool for international couples with U.S. assets.

They balance legal compliance with asset protection and offer surviving non-citizen spouses the financial stability they deserve.

Consulting a U.S.-based estate attorney experienced in international taxation is highly recommended when drafting a QDOT.

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Keywords: QDOT, qualified domestic trust, non-U.S. spouse estate tax, cross-border inheritance, IRS marital deduction