Qualified Domestic Trusts
The benefits of a living trust are vast, and include avoiding the costly and time-consuming process of probate, as well as avoidance of certain taxes. The estate tax is currently set at approximately $5.5 million (anything less is not subject to taxation), meaning that most people who pass on their assets to their loved ones will never have to think about the estate tax. For married couples, even if their estate is worth more than this, they do not have to pay any taxes when one dies and leaves the assets to the other. However, it is not so simple when the surviving spouse who is named in the trust or will is not a U.S. citizen. For more information, contact a San Francisco estate planning attorney.
A QDT is Used to Avoid Taxation When One Spouse Dies
When a testator dies, they can pass on their assets tax-free during the other spouse’s lifetime, which is one of the financial benefits of being married. A Qualified Domestic Trust (QDT) is used to enable this marital tax deduction to occur when the surviving spouse is not a U.S. citizen. Qualifications for a QDT include the following, according to the American Bar Association:
- At least one trustee is a citizen of the U.S. or is a U.S. corporation;
- Principal distributions can only be made to the surviving spouse;
- Treasury regulations are met; and
- The executory must elect to treat the trust as a QDT.
Tax savings with a QDT can be substantial for many people. To find out if a Qualified Domestic Trust is right for you and your spouse, an attorney is available to help.
A San Francisco Estate Planning Attorney is Here to Help
Not all non-citizen spouses have time to become U.S. citizens after they marry a U.S. citizen, as it still usually requires three years of living in the U.S. as a spouse of a citizen to become a U.S. citizen, according to the Citizenship and Immigration Services. Moreover, many people have no desire to become a U.S. citizen at all. A QDT can allow a non-citizen spouse to reap the tax benefits as a U.S. citizen when their loved one passes away. For questions regarding the process of creating a Qualified Domestic Trust, do not hesitate to contact the experienced San Francisco estate planning attorneys of Lvovich & Szucsko, P.C. today.