On August 21, 2024, the Internal Revenue Service published proposed changes to regulations under Section 2056A of the Internal Revenue Code related to QDOT.

Generally, there is no marital deduction for property that passes to a non-citizen spouse. However, IRC Section 2056A provides that a QDOT (a certain type of marital trust) will qualify for the marital deduction if it includes certain administrative requirements and the appropriate election is made on the estate tax return. Administrative requirements include, among other things, maintaining a US citizen trustee, in some cases having an institution or bank as trustee, and withholding estate taxes on the distribution of principal. A QDOT is needed when property passes from a decedent to a noncitizen spouse to qualify for the marital deduction that would otherwise be denied to such spouses.

The main purpose of these changes is to refresh outdated terminology, references, responsible parties and procedures. The changes detail the following changes:

1. Updating references to the 1995 temporary regulations. The amendments propose to update references throughout the 1995 interim regulations to the current version in effect.
2. Updating definitions. The definition of “finally determined” for determining the value of assets within a QDOT has been updated to align with current IRS practices. Specifically, the new definition excludes references to an “estate tax closing letter,” which the IRS no longer requires.
3. Update IRS offices, officials and file locations. The changes correct outdated references to IRS officials, offices, and specific file locations. For example, the term “District Director” and references to “Assistant Commissioner (International)” are replaced with current titles such as “Chief Tax Compliance Officer, IRS”.
4. Updating procedures for depositing security instruments. The amendments revise the procedures for filing security instruments required under QDOT provisions, such as bonds. These documents must now be submitted directly to the Estate Tax Advisory Group instead of being attached to the decedent's estate tax return.
5. Updating references to Customs and Uniform Practice for Documentary Credits. References to Customs and Uniform Practice for Documentary Credits have been updated from the 1993 revision to the latest version.
6. Deposit locations and methods. The amendments provide updated guidance on where and how to file essential documents with the IRS, directing practitioners to IRS Publication 4235 or the IRS website for the correct filing locations.

These proposed changes are intended to refresh and clarify the regulations to better serve current practitioners and ensure proper administration of QDOT.