Does The Language Contained Be A Qualified Domestic Trust?

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I. QUESTION PRESENTED Does the language contained in Form M allow the trust it creates to qualify under I.R.C. § 2056A as a qualified domestic trust treatment? II. SHORT ANSWER Form M does not provide all of the required language needed to allow a trust to qualify for domestic trust treatment. It is missing two important portions of language needed to allow it to fulfill the qualification requirements contained in section 2056A and its accompanying regulations. First, it does not designate that the laws of a particular state will govern administration or be the location of record keeping. Secondly, the terms of the trust do not otherwise meet the requirements for the marital deduction under section 2056. Simple changes can be made to the…show more content…
I.R.C. § 2056(d)(1). Congress has provided an exception to this general rule in the form of a qualified domestic trust (QDOT), which allows the property to qualify for the marital deduction if the trust meets certain requirements. I.R.C. § 2056(d)(2)(A). For a trust to qualify for QDOT status and the marital deduction, it must meet the seven requirements contained in the tax code and accompanying treasury regulations. I will separately discuss each requirement below and whether the currently language of Form M effectively fulfills that requirement. B. Designation of U.S State for Administration and Record Keeping The instrument creating the trust must designate that the laws of a U.S. state or the District of Columbia will govern the administration of the trust and that the trust must be maintained under this jurisdiction’s laws. The trust records, or copies of these records, must be kept in the same state which is designated for the administration of the trust. Treas. Reg. § 20.2056A-2(a). The language of Form M does not specify or mention any state for the location for administration of the trust or as a location for record keeping. To qualify under this requirement, the document should include the following language or something similar: “This trust shall at all times be governed, construed and administered in accordance with the laws of the [Commonwealth of Virginia or other State].” C. Trust Must Qualify as “Ordinary Trust” The instrument must create a trust
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