A qualified domestic trust could be a very important estate planning tool under certain circumstances. This type of trust is not necessary for everyone, but is necessary for individuals with certain financial and marital situations. If you need this type of trust and you do not create one, the absence of the trust could have a profound impact on the inheritance that you leave behind to a spouse after you pass away.
Mark S. Eghrari & Associates PLLC can provide you with assistance in understanding if you need a qualified domestic trust. Our legal team can also help you to create this type of trust if it is necessary for you, and can advise you on any other kinds of trusts that you may need to create as part of your estate planning process.
Trusts are powerful legal tools that can serve many different purposes and provide important protections for your family and for your assets. Let our Long Island trust lawyers assist you in making effective use of trusts that should be part of your estate plan.
Do I Need a Qualified Domestic Trust?
You may need a qualified domestic trust if you have a larger estate that you want to leave to your husband or to your wife, but your spouse is not a United States Citizen. The creation of this type of trust could help to ensure that your estate does not have to pay a large estate tax bill when you pass away that substantially reduces the value of the inheritance that your spouse receives.
Under federal law in the United States, your estate must pay estate tax if you pass away with assets over the exempt amount, which is $5.49 million as of 2017, and if you leave your assets to anyone other than your spouse. New York also has estate tax rules, and NY’s exemption is currently lower than the $5.49 million federal exemption, although NY is gradually raising its exemption amount.
The federal government normally makes an exception on charging estate taxes when you leave money and property to a spouse for a number of reasons, including the fact that the government believes it will eventually be able to collect tax on the transferred assets. While no tax is due to the IRS on the assets you leave to your husband or wife, the IRS assumes that the last surviving spouse will leave assets to children or to some other family members. As a result, the IRS will be able to collect taxes on the transferred assets at that time.
However, this basic premise is true only if the spouse who inherits assets is a United States citizen. A non-citizen who inherits could leave the country and could potentially take inherited assets out of the country, only to pass away with those assets someplace outside of the United States so the IRS isn’t able to collect an estate tax. Because of this possibility, there are different rules for estate tax when money and property is left to a non-U.S. Citizen spouse. Estate taxes could be due on assets over the exempt amount if those assets are left to a spouse who isn’t a citizen.
If you do not want your estate to be forced to pay a big tax bill when you pass away and leave your wealth to your non-citizen spouse, you can create a qualified domestic trust to help ensure that this does not happen. A qualified domestic trust can protect the inheritance you want to leave to your husband or wife when you work with an experienced attorney to ensure you create the trust properly and follow all required legal formalities for trust creation.
Getting Help from A Long Island Trust Lawyer
Mark S. Eghrari & Associates PLLC can work with you to determine whether trusts, including a qualified domestic trust, should be a part of your estate plan. If trust creation is appropriate to help protect your family and your assets, our legal team can also assist you with the process of following formalities under NY law to create a legally valid trust.
To learn more about qualified domestic trusts and to get help creating this type of trust to protect an inheritance you want to leave to a spouse who is not a United State’s citizen, give us a call at (631) 265-0599 or contact us online. You can also download our estate planning checklist to find out more about how trust law works and to learn about how trusts can fit in to your comprehensive estate plan.