Under current law, a “marital deduction” within the tax code allows unlimited tax-free transfer of property between spouses. However, the unlimited marital deduction does not apply to non-citizen spouses, even if they are permanent residents. This exception is intended to ensure non-citizen spouses pay estate tax on any property they inherit before leaving the country upon the death of his or her husband or wife.
To take advantage of the marital deduction and avoid estate tax, a qualified domestic trust (QDOT) can be created for a non-citizen spouse. I am Richard A. Sarner of Zeldes, Needle & Cooper, P.C., and I work with tax experts and financial planners to create trusts that allow couples to plan for their financial security and that of their children. While a QDOT may be the first step, other trusts or estate planning tools also can be used to ensure that health care needs or the care of children are provided for as well.
If you and your non-citizen spouse are interested in the estate planning options available to you, contact me today and schedule an appointment at my offices in Stamford, Connecticut, or New York City.
In order to establish a QDOT, the following requirements must be observed:
In addition to a QDOT for your non-citizen spouse, you may choose to create other trusts to ensure the financial security of your children. While a QDOT provides tax-deferred income over the lifetime of your non-citizen spouse, upon his or her death any remaining assets in a QDOT are subject to taxation. Creating a revocable trust that splits into a living trust for a surviving spouse and a family trust for children may be an effective means for ensuring your children are provided for as well.
Sometimes, the Internal Revenue Service (IRS) may place special requirements on a QDOT to ensure taxes will be paid on it after the death of the surviving spouse. To comply with IRS requirements, you may need to appoint a U.S. bank as your trustee or provide a bond for security against the value of the trust.
I have the experience and knowledge to help you create a QDOT or other trust that provides for the financial security of your family after you’re gone. To schedule an appointment and learn more about how I can help you, contact me today.