Which is a requirement for income from a QDOT?

Income from a Qualified Domestic Trust (QDOT) must be distributed to the non-U.S. citizen spouse annually to meet the requirements set forth by the IRS. This requirement is designed to ensure that the non-U.S. citizen spouse benefits from the income generated by the trust during their lifetime, while also providing certain tax advantages that are only available through a QDOT.

The intention behind mandating that all income must be distributed is to protect the non-U.S. citizen spouse from potential tax liabilities and ensure they receive financial support from the trust assets, which may be important for their living expenses. The QDOT structure is specifically created to address the tax concerns that arise when a U.S. citizen leaves assets to a non-U.S. citizen spouse, as it ensures that the estate taxes can be deferred until the death of the non-U.S. citizen spouse.

In contrast, the other options present variations that do not align with the IRS requirements for QDOTs, such as allowing income to remain undistributed or distributed at other arbitrary times. The annual distribution requirement serves to fulfill both tax compliance and provide necessary financial support to the surviving spouse.