how a qualified domestic trust qdot works
a qualified domestic trust allows a non citizen surviving spouse of a deceased taxpayer to take full advantage of the marital deduction on estate tax for any assets that are placed into the trust before the death of the decedent this kind of trust is helpful for the non citizen surviving spouse who under standard tax laws would not be eligible for the 100 marital deduction on estate tax as per the irs under section 2056a a surviving spouse is eligible for a 100 marital deduction of any estate taxes owed on assets this means the surviving spouse pays no taxes on assets with no limit however if the surviving spouse is not a u s citizen the full marital deduction normally is not allowed in addition a non resident non citizen cannot take advantage of the same estate tax exemption amount that applies individually or jointly to a u s citizen surviving spouse forming a qdot and putting all assets into the trust allows a non citizen surviving spouse to take advantage of the marital deduction of 100 of estate taxes it s also important to note that the surviving spouse can set up and fund the qdot if their spouse failed to before the federal estate tax return is filed for surviving spouses who have not obtained u s citizenship for any reason a qdot is the best way to preserve marital assets it is important to comply with all requirements and provisions of the trust for it to remain valid a qdot only protects the assets of decedents who have died after november 10 1998 in addition at least one trustee of the qdot must be a u s citizen or a domestic corporation authorized to retain estate tax if all these conditions are met forming a qdot and placing marital assets into it can preserve assets for the surviving non citizen spouse any assets not included in the trust will not qualify for the marital deduction and will be subject to estate taxes limitations of a qdotalthough a qdot allows the qualifying non citizen surviving spouse to take the marital deduction on assets inside the trust it does not exempt the trust from paying the estate tax it merely defers it until the death of the surviving non citizen spouse at that time the estate will be liable for section 2056a estate taxes on all assets in the qdot whether or not there are surviving beneficiaries this could reduce the value of the assets in the trust significantly for such beneficiaries 