Joan is married to Perry, a citizen of Great Britain. She passed away unexpected

Question

Joan is married to Perry, a citizen of Great Britain. She passed away unexpectedly in a car crash owning $5 million in assets in 2006. Unaware of the problems associated with marriage to a non-citizen, she did not plan to minimize the estate taxes due when a non-citizen receives a distribution from an estate. Based on these facts, which of these are accurate statements:

a. Perry has no choice but to pay estate tax on the $5 million he inherited outright from Joan's estate without the benefit of any unified credit.

b. Perry can create a QDOT and transfer the $5 million to this QDOT and the assets will avoid estate tax completely although they will be available for distribution of income to him and principal invasions for his health, support and maintenance can be paid to him as well without any estate tax consequence.

c. Perry can create a QDOT and he will only pay estate tax on all the distributions to him from the QDOT.

d. None of these are accurate statements.

b. Perry can create a QDOT and transfer the $5 million to this QDOT and the assets will avoid estate tax completely although they will be available for distribution of income to him and principal invasions for his health, support and maintenance can be paid to him as well without any estate tax consequence.

c. Perry can create a QDOT and he will only pay estate tax on all the distributions to him from the QDOT.

d. None of these are accurate statements.

Explanation / Answer

b. Perry can create a QDOT and transfer the $5 million to this QDOT and the assets will avoid estate tax completely although they will be available for distribution of income to him and principal invasions for his health, support and maintenance can be paid to him as well without any estate tax consequence

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