A qualified domestic trust is a very important estate planning tool if a couple is married and has property in the United States, but one of the spouses is not a United States citizen. If you are in a marriage and either you or your spouse is not a U.S. citizen, you should strongly consider creating a qualified domestic trust in order to avoid the potential that your estate will potentially be hit with a substantial tax bill.
Zimmer Law Firm can provide you with the help that you need to make a comprehensive estate plan, no matter what your personal or family situation. Our legal team has extensive experience assisting individuals and families who have complications to consider in the estate planning process, such as one of the spouses not being a U.S. citizen.
Give us a call to find out if you need a qualified domestic trust or if there are other legal tools that we can help you to use to make plans to protect your legacy.
What is a Qualified Domestic Trust?
A qualified domestic trust, or QDOT as it is also called, is a special type of trust that is defined in 26 U.S. Code section 2056A. The purpose of the trust is to make it possible for a person who is a United States citizen to pass on assets tax-free to a spouse who is not a citizen of the U.S.
If you are married, normally you are able to pass your entire estate onto your spouse without any federal estate tax being assessed. You can do this because the government assumes that when your spouse passes away, the government will simply collect the taxes on your estate at that time.
However, if your spouse is not a United States citizen, it is possible that your spouse could inherit and could then leave the United States and go back to the country where he or she is a citizen. This could result in the U.S. forever losing the opportunity to tax the assets if your spouse passes away while living in the foreign country.
A Qualified Domestic Trust was created to allow the assets to pass on to the owner tax free, but to make sure the U.S. is ultimately able to collect taxes. Estate taxes are collected on principal taken out of the trust and are collected on the balance of the trust after the death of the surviving spouse.
Do You Need a Qualified Domestic Trust?
You only need to worry about creating a qualified domestic trust if one spouse is not a United States citizen and if your estate could potentially be subject to estate tax if such a trust is not created.
Estate tax is not assessed by the federal government on all estates. You are allowed to transfer a certain amount of wealth to anyone you want (spouses, kids or others) as long as the estate does not exceed a certain value, called the exempt amount. As of 2017, you are allowed to transfer $5.49 million without taxes being assessed on the estate.
This means that many people simply do not have enough wealth to be subject to estate tax. However, if you do have a substantial amount of money or property, or if you have a valuable interest in a business, you could face a substantial estate tax bill that has to be paid out of your estate if you do not make plans to avoid this taxation.
A qualified domestic trust is a key part of your plan to allow you to avoid costly estate tax if you have a larger estate and you have a non-U.S. Citizen spouse who could inherit after your death.
Getting Help from A Cincinnati Trust and Estate Planning Lawyer
Zimmer Law Firm can assist you in the creation of a qualified domestic trust or in the creation of any other type of trust that you may need as a part of your estate plan. We know the ins-and-outs of legacy planning and we will help you to use the right legal tools to provide essential protections for your spouse, the people you love, and the causes that you care about.
To find out more about the ways in which our legal team can help you to control what happens to your estate and how we can help you to protect your wealth, join us for a free seminar. You can also give us a call at 513.721.1513 to get personalized assistance with trust creation and more. Give us a call today to get started.