- When an individual dies, his estate can be passed on to beneficiaries. At this point, the total value of his estate will be subject to estate taxes. If the value of the estate is below a certain exemption level, no estate taxes will be paid. If the person passes the wealth onto his spouse, no estate taxes will be due. However, this spousal estate tax exemption is only available if both people are citizens of the United States.
- Since the standard estate tax exemption is only available when both members of the married couple are citizens of the United States, another option must be pursued if one person is a non-citizen. Otherwise, the entire estate would be subject to estate taxes before the money can go to the surviving spouse. For this purpose, the QDOT trust is used. When the couple puts assets into the QDOT trust, it can then be passed on to the surviving spouse without paying estate taxes.
- When you set up a QDOT trust to help your spouse get your entire estate, you must name a trustee to maintain the assets in the account. Under the rules for the QDOT trust, the trustee cannot be the non-citizen spouse. Instead, you must name a trustee that is a U.S. citizen. You could also name a United States bank as a trustee for the QDOT trust. Then, at the proper time, the trustee can pass the assets to the spouse.
- The time of creation is not as critical with a QDOT trust as it is with other trust arrangements. This type of trust can be created while you are still alive or it can be created by the non-citizen spouse after you die. To create the trust after death, the executor of the estate must make the arrangements and transfer the money into it. Then the non-citizen spouse can take the money back to her own country if she so chooses.
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