Many Washington, DC residents are married to people who are not citizens of the United States. This can make estate planning a challenge since a couple in which one spouse is not a citizen will not receive the same marital exemption as spouses who are both U.S. citizens. Qualified Domestic Trusts (QDOT) provide many couples who are not both citizens of this country with a viable estate planning option.
Gifts between spouses who are both U.S. citizens are not subject to taxes, but if one or both spouses are not citizens, the exemption is only $120,000 per year. A QDOT can provide an income stream to the surviving spouse, who will not have to pay taxes unless he or she removes the principal of the trust or dies. In order to use such a trust, one of the two must be a U.S. citizen.
Who can serve as the trustee of the QDOT depends on the value of the estate. If the value exceeds $2 million, a bank here in the United States must serve as the trustee. Under that amount, the only requirement is the trustee has to be either a citizen or domestic bank. The trustee will have to be bonded for 65 percent of the value of the QDOT's principal. Other requirements must be met as well.
Estate planning attorneys in Washington DC help ensure that Qualified Domestic Trusts comply with all applicable laws and regulations because the ramifications of an improperly drafted and executed trust could prove costly for the surviving spouse. Any additional time, effort and cost upfront might be worth the peace of mind in knowing that the surviving spouse will be taken care of in the event of death. More information on these trusts and other estate planning issues is available on our website.