<p>The law concerning aliens who reside in the united States was changed  in 1988. The law provides that there is no marital deduction for  property received by a surviving alien spouse (non U.S. citizen) from  the deceased spouse. This means that an alien husband and wife will not  be allowed the marital deduction if one of them should die. The  consequences of this law are very important.</p>
<p>In California the  husband and wife own their property equally as community property, each  owning a 2 undivided interest. Under the 1988 law, when one spouse dies,  the one half interest of the deceased spouse is fully taxable.</p>
<p>For  example, if a resident alien husband and wife owned community property  of $12,000,000 and the husband died. The husband's one half, namely  $6,000,000 will be fully taxable. Under the death tax laws, the first  $5,000,000 (in 2013) of the husband's property would be exempt from  death taxes. The remaining $1,000,000 would be taxed. The death tax for  this amount would be about $450,000.</p>
<p>This 1988 law provides for an  exception to this rule. If a Qualified Domestic Trust? (QDT) has been  created by the resident alien husband and wife, then there will be no  tax when the first spouse dies.</p>
<p>The requirements are:</p>
<ol>
<li>All trustees of the trust must be U.S. citizens or domestic corporations. (The surviving alien spouse cannot be a trustee)</li>
<li>The surviving spouse must receive all of the income of the trust.</li>
<li>The trust must comply with special treasury regulations.</li>
<li>The executor must make an election on the decedent's estate tax return to have the trust treated as a QDT.</li>
</ol>
<p>The  QDT only defers payment of death taxes. Upon the death of the surviving  second spouse, the property remaining in the QDT trust will be taxed  retroactively in the estate of the first deceased spouse.</p>
<p>The need  for special estate planning for resident aliens is very important under  this law. Life insurance could solve certain problems created under  this law.</p>