The QDOT Regulations of July 2026: What T.D. 10050 Changes

Part I. The trust the regulations secure

Property passing to a surviving spouse who is not a US citizen does not qualify for the marital deduction, and the rule that includes only half of spousal joint property does not apply (I.R.C. § 2056(d)(1)), whether or not the survivor lives in the United States (Treas. Reg. § 20.2056A-1(a)). For a citizen or domiciliary, the basic exclusion amount of USD 15,000,000 for 2026 shelters the estate first (I.R.C. § 2010(c)(3)).

The principal route is the qualified domestic trust (I.R.C. § 2056(d)(2)(A)). Property passing outright qualifies if the survivor transfers it to such a trust before the return is made, or assigns it irrevocably under an assignment enforceable under local law (I.R.C. § 2056(d)(2)(B)); a nonqualifying trust can be reformed in a judicial proceeding commenced by the extended due date of the return (I.R.C. § 2056(d)(5)(A)).

The statute requires at least one trustee who is an individual citizen or a domestic corporation, no distribution other than income unless such a trustee may withhold the tax, compliance with the regulations that secure collection, and the executor’s election (I.R.C. § 2056A(a)). No election may be made on a return filed more than one year after its due date, including extensions (I.R.C. § 2056A(d)), and the election is irrevocable (Treas. Reg. § 20.2056A-3(a)). The tax is deferred, not removed: it is imposed on distributions of principal during the survivor’s life and on the property remaining at the survivor’s death, measured by the tax the first estate would have paid (I.R.C. § 2056A(b)(1), (2)(A)).

The regulations add that the trust be maintained under the laws of a state or the District of Columbia and be an ordinary trust (Treas. Reg. § 20.2056A-2(a)), and that an individual US Trustee have a tax home in the United States (Treas. Reg. § 20.2056A-2(d)(2)). T.D. 10050 amends the security arrangements and their procedures.

Part II. What the Treasury decision amends

T.D. 10050 (RIN 1545-BQ88) was published in the Federal Register on July 10, 2026 as document 2026-13925 and took effect on publication. It finalizes the regulations proposed as REG-119683-22 (89 Fed. Reg. 67580, August 21, 2024). The preamble gives the purpose as updating outdated references, information and procedures, including references to IRS officials, offices and addresses that no longer exist. Neither of the two written comments received led to a change. A correction followed on July 24, 2026 (91 Fed. Reg. 46724).

The proposal would have reached only the estates of decedents dying after publication of the final rule. The final rule applies on and after July 10, 2026, without that limitation (Treas. Reg. §§ 20.2056A-2(e), 20.2056A-4(e), 20.2056A-11(e)). Section 20.2056A-13, as revised, states the general applicability of the QDOT regulations to estates of decedents dying on or after August 22, 1995.

Part III. The bond and the letter of credit

Where the trust assets exceed USD 2,000,000, measured without reduction for indebtedness, the trust must at all times have a bank as US Trustee (or a US branch of a foreign bank serving with a US Trustee), a bond, or an irrevocable letter of credit payable at sight, the bond and the letter of credit each for 65 percent of the fair market value of the trust assets. The trust may change arrangements, provided one is operative at every moment (Treas. Reg. § 20.2056A-2(d)(1)(i)).

The August 2025 instructions for Form 706-QDT still state that the executor must have filed the bond or letter of credit with the Form 706 or Form 706-NA on which the election is made. The amended regulation prescribes another route: the bond, or the letter of credit with any confirmation, is filed separately from the estate tax return, directly with the Estate Tax Advisory Group of the IRS or its successor office, on or before the later of the filing date or the due date of the return (Treas. Reg. § 20.2056A-2(d)(1)(i)(B)(4), (C)(5)). The US Trustee attaches a written statement listing the assets that will fund the trust and their values, and stating whether a personal residence exclusion is claimed. The address is in IRS Publication 4235.

The instrument runs for at least one year and renews automatically unless a notice of non-renewal is mailed at least 60 days before the term ends, now to the US Trustee and to the Estate Tax Advisory Group. The IRS does not draw on it if, within 30 days of the notice, the US Trustee reports that an alternative arrangement is in place (Treas. Reg. § 20.2056A-2(d)(1)(i)(B)(1), (C)(1)).

Part IV. When the values are finally determined

The USD 2,000,000 test and the 65 percent amount use the fair market value of the trust assets as finally determined for estate tax purposes (Treas. Reg. § 20.2056A-2(d)(1)(iii)). The former definition included the issuance of an estate tax closing letter, a reference the preamble calls outdated. The amended text names four events (Treas. Reg. § 20.2056A-2(d)(1)(iii)(A)(1) to (4)):

• the value reported on the return, once the period of limitations on assessment under section 6501 has expired without a timely adjustment by the IRS;
• a value determined by the IRS for unreported property, once that period has expired without the executor having timely contested it;
• a value fixed in a written agreement with the IRS, once both the executor and the IRS have executed it;
• a value determined by a court for the estate tax liability, once the determination can no longer be appealed.

To contest means to put the value of property at issue in a written communication to the IRS; a general protective statement does not suffice (Treas. Reg. § 20.2056A-2(d)(1)(iii)(B)).

Three rules run from the final determination. Where a bond or letter of credit is in place, the US Trustee has a reasonable period, not exceeding 60 days, to adjust its amount (Treas. Reg. § 20.2056A-2(d)(1)(i)(B), (C)). Where assets reported at USD 2,000,000 or less are finally determined to exceed that figure, the same period applies to putting an arrangement in place (Treas. Reg. § 20.2056A-2(d)(1)(ii)). In either case, if the reported value was 50 percent or less of the correct value, the marital deduction is disallowed entirely, unless the undervaluation had reasonable cause and the fiduciary acted in good faith (Treas. Reg. § 20.2056A-2(d)(1)(i)(D)).

Part V. What remains as it was

The amendatory instructions leave the thresholds, taxable events and liability rules untouched. Beyond the filing route and the final value test, the changes are to names: the Chief Tax Compliance Officer may request a security agreement under an annuity agreement where the plan is administered abroad (Treas. Reg. § 20.2056A-4(c)(6)(ii), (c)(7)(ii)), and the Advisory Group Managers grant extensions of time to pay, of up to six months for the tax on a distribution, twelve months for the tax at death and, for reasonable cause, ten years for the tax at death (Treas. Reg. § 20.2056A-11(c)).

A hardship distribution is still reported on Form 706-QDT (Treas. Reg. § 20.2056A-5(c)(1)).

Part VI. The treaty alternative

The decision leaves the treaty route untouched; where available, it is the first question. Three instruments grant it to qualifying estates without a trust, on an election made by the date on which a QDOT election could be made and an irrevocable waiver of any marital deduction under US law.

Under the German and French provisions, qualifying property is property that would qualify for the marital deduction if the survivor were a citizen. Because the waiver is irrevocable, an estate that elects the treaty cannot add a trust for the amount above the treaty limit. For a decedent who was neither a citizen nor a resident but resided in a treaty country, the regulations state the same choice: the treaty deduction or section 2056A, not both (Treas. Reg. § 20.2056A-1(c)). The French tax consequences of either route are a matter for French counsel.

The firm is led by attorney Caroline Esche Ashford, PhD, JD. A graduate of Columbia University Law School, her practice focuses on international estate planning and the cross-border taxation and administration of estates and trusts, including estates with a surviving spouse who is not a US citizen. Dr. Ashford is also licensed to practice law in Germany. She advises in French and German as well as English.