Notice and Qualified Domestic Trusts

The IRS released a Private Letter Ruling (PLR) on notice with Qualified Domestic Trusts (QDOT). In this case, the decedent’s surviving spouse was a foreign national and had just become an American citizen. Before the spouse became an American citizen, she drafted a QDOT for the funds that her spouse passed to her. However, the spouse did not provide notice to the IRS of her citizenship change. If the spouse did provide notice, then the estate tax would not apply to her QDOT. 

The PLR held that the code states that as long as the taxpayer acts reasonably and with good faith, then the IRS can grant an extension to the taxpayer to provide notice that she had in fact become an American citizen. Because her lawyer failed to mention this exclusion, the government granted the extension. The PLR reasoned that if the taxpayer relies upon a tax professional, then the taxpayer acts reasonably and with good faith.

See I.R.S. Priv. Ltr. Rul. 20-12-20017 (May 18, 2012).

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.