Non-U.S. Citizens and a Qualified Domestic Trust (QDOT)

For married couples, if one of the spouses is not a U.S. citizen, the standard trust vehicle is insufficient. While California now allows any portion of the unused estate tax exemption by one spouse at passing to be transferred to that of the surviving spouse, the surviving spouse cannot benefit from this if they are not a U.S. citizen. A properly prepared estate plan utilizing a qualified domestic trust, or QDOT, can help address this shortcoming.

The qualified domestic trust allows a non-citizen to benefit from the marital deduction they otherwise would not be able to utilize, but only on the assets that are placed in the trust. This makes it all the more important that the trust vehicle is prepared as soon as possible and that it is regularly updated anytime you and your spouse have any significant change in assets, especially upon gaining new assets such as real estate.  If an asset is left out of the QDOT before the citizen spouse passes, there is a risk that it cannot qualify for the exemption amount and a certainty that a probate judge will decide how that asset is distributed.

There are various technical requirements for a trust to qualify as a QDOT trust, but of greatest relevance for the couple seeking to create a QDOT trust is that they must select at least one (1) trustee for the trust to be either a U.S. citizen or U.S. corporation. For couples where one spouse is a non-citizen, it is of utmost importance to choose an attorney experienced in both estate planning and working with non U.S. citizens to make sure that the incorporated QDOT trust meets all the qualifications or you will risk losing this marital exemption.

Experience & Affiliations

California State BarCalifornia State Bar
California Real EstateCalifornia Department of Real Estate
Shearman and Sterling LawShearman & Sterling
Law Society of CanadaLaw Society of Canada
Law Society of EnglandLaw Society of England

Legal Industry:

• Attorney, Member of the State Bar of California

• Solicitor in England and Wales

• Solicitor and Barrister in Ontario, Canada

Real Estate Industry:

• Licensed Broker #01841337, California Department of Real Estate