Qualified Domestic Trust -

• A trust setup by a US citizen for the benefit of a non-US citizen spouse

• Unlimited marital deduction does not apply to noncitizen spouses

• An amount equal to the estate tax exemption may be transferred tax free

• Any amount over that is subject to an estate tax

• QDOT provides a substitute for the unlimited marital deduction. It temporarily qualifies property passing to a surviving non-citizen spouse for the marital deduction until the surviving spouse’s death

• Estate tax applies to the citizen spouse’s estate when the non-citizen spouse dies – based on the rules in effect in the year of the citizen spouse’s death

• The annual exclusion for gifts to a non-citizen spouse is $152,000 in 2018

• At least one trustee must be a US citizen or a domestic corporation

• Personal representative of citizen spouse must make QDOT election on 706

Special rules -

• Large QDOT – if assets in excess of $2 million, at least on trustee must be a US bank or furnish a bond or letter of credit equal to 65% of FMV of trust assets

• Small QDOT – must either have a bank as a trustee or require no more than 35% of real property be located outside the US

Disclaimer Trust -

• A disclaimer is a refusal to accept money or other property by someone who would otherwise be your beneficiary according to your will, trust, gift, insurance policy, retirement account, or your state's intestacy laws

• The person who disclaims the property (the "disclaimant") is treated as if he or she predeceased you and never received the property

• Without a disclaimer trust, the disclaimed property would pass directly to other individual beneficiaries according to your state's laws

• Grantor would specify where the assets will be shifted in case of a disclaimer

• The surviving spouse or other beneficiary may not disclaim

• A Bypass trust may be more effective

• Can be advantageous when there is a special needs beneficiary

The zero estate tax strategy is the most frequently used marital deduction planning strategy used by estate and financial planners. This strategy splits the first-to-die spouse’s estate into two shares: one taking the advantage of the marital deduction via the establishment of either the A or C trust and the second bypassing taxation in the surviving spouse’s estate via the creation of the B trust. The B trust is funded with the amount equal to the current exemption ($11,400,000 in 2019) with property that is expected to appreciate. A/C trusts are funded with income producing property. A variation of this strategy is to use all three trusts together (A,B & C) and then fund the A trust with the original decedent’s personal property and the C trust with the remainder of the original decedent’s property after the non-marital B trust is funded.

In addition, sometimes the use of the D trust option (along with AB or BC) is also included.