Qualified Domestic Trust

A Qualified Domestic Trust (QDOT) is a special type of marital trust that allows a non‑U.S. citizen surviving spouse to receive the same marital deduction that U.S. citizen spouses automatically get for estate tax purposes.

QDOT is NOT a separate species of trust, but a status or qualification that an otherwise ordinary marital trust can obtain.

Without a QDOT, a non‑citizen spouse cannot receive the unlimited marital deduction — meaning the estate could owe immediate estate tax at the first spouse’s death.

A QDOT defers that tax until:

  • the surviving spouse dies, or
  • certain principal distributions are made.

How a QDOT Works

  1. U.S. citizen spouse dies
  2. Assets intended for the non‑citizen spouse are placed into a QDOT
  3. The surviving spouse receives income for life (not taxed as estate tax)
  4. Principal distributions may trigger estate tax unless an exception applies
  5. When the surviving spouse dies, estate tax is assessed on the remaining trust assets

Mandatory Legal Requirements

A QDOT must satisfy six strict requirements under IRC §2056A. Here are the most important ones:

  1. U.S. Trustee Requirement
    At least one trustee must be:
  • a U.S. citizen, or
  • a domestic corporation
    For trusts over $2 million, the trustee must be a U.S. bank or trust company.
  1. Withholding Authority
    The U.S. trustee must have explicit authority to withhold estate tax on principal distributions.
  2. All Income Must Be Paid to the Surviving Spouse
    At least annually.
    Income distributions do not trigger QDOT tax.
  3. QDOT Election on Form 706
    The executor must make the QDOT election on a timely filed Form 706.
    No election = no marital deduction

5. The Trust Must Be Governed by U.S. Law
A QDOT must be maintained under the laws of a U.S. state or D.C., and its administration must be governed by that state’s law.
This ensures the IRS has jurisdiction and access to trust records.

Key points:

  • Trust records must be kept in the U.S.
  • A foreign trust instrument can be used, but it must designate U.S. law as governing administration.
  • The trust must qualify as an ordinary trust under federal tax regulations.

6. The Trust Must Be Structured as a Qualifying Marital‑Deduction Trust

The trust must be one of the approved marital‑deduction trust types, such as:

  • a power of appointment trust,
  • a QTIP trust,
  • a qualified charitable remainder trust, or
  • an estate trust.