IRS Updates QDOT Rules

On Aug. 21, 2024, the Inside Income Service printed proposed amendments to the laws below Inside Income Code Part 2056A that relate to QDOTs.

Normally, there’s no marital deduction for property passing to a non-citizen partner. Nonetheless, IRC Part 2056A gives {that a} QDOT (a sure sort of marital belief) will qualify for the marital deduction if it consists of sure administrative necessities and the right election is made on the property tax return. The executive necessities embrace, amongst others, sustaining a U.S. citizen trustee, in some circumstances having an establishment or financial institution as trustee and withholding property taxes on distributions of principal. A QDOT is important when property passes from a decedent to a non-citizen partner to qualify for the marital deduction that may in any other case be denied to such spouses.

The first objective of those amendments is to refresh outdated terminology, references, accountable events and procedures. The amendments element the next adjustments:

Updating References to 1995 short-term laws. The amendments suggest updating references all through the 1995 short-term laws to the at the moment efficient model.

Updating definitions. The definition of “lastly decided” for establishing the worth of property inside a QDOT is up to date to align with present IRS practices. Particularly, the brand new definition excludes references to an “property tax closing letter,” which the IRS not requires.

Updating IRS places of work, officers and submitting areas. The amendments right outdated references to IRS officers, places of work and particular submitting areas. For instance, the time period “District Director” and references to the “Assistant Commissioner (Worldwide)” are changed with present titles such because the “Chief Tax Compliance Officer, IRS.”

Updating procedures for submitting safety devices. The amendments revise the procedures for submitting safety devices required below QDOT provisions, resembling bonds. These paperwork should now be submitted on to the Property Tax Advisory Group relatively than being hooked up to the decedent’s property tax return.

Updating references to the Uniform Customs and Follow for Documentary Credit. The references to the Uniform Customs and Follow for Documentary Credit have been up to date from the 1993 revision to the latest model.

Submitting areas and strategies. The amendments present up to date directions for the place and learn how to file important paperwork with the IRS, directing practitioners to IRS Publication 4235 or the IRS web site for the proper submitting areas.