What Form 706-NA Is For

Form 706-NA is the United States Estate (and Generation-Skipping Transfer) Tax Return specifically designed for estates of individuals who were neither U.S. citizens nor U.S. residents at the time of death. This form serves two main purposes: it calculates the federal estate tax owed on U.S.-situated assets and determines any generation-skipping transfer (GST) tax liability when assets pass to beneficiaries more than one generation removed from the decedent (such as grandchildren).

Unlike U.S. citizens and residents whose worldwide assets are subject to estate taxation, nonresident aliens (often called "nonresident not a citizen" or NRNC decedents) are taxed only on property physically located in the United States. This creates a narrower but still significant tax exposure for foreign nationals who own American real estate, U.S. securities, business interests, or other tangible property within U.S. borders.

The estate tax operates as a transfer tax—meaning it's imposed on the privilege of transferring property at death, rather than on the beneficiaries who receive it. The executor or personal representative of the estate bears responsibility for filing Form 706-NA and ensuring any tax liability is paid before distributing assets to heirs.

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When You’d Use It (Late/Amended Filing)

Standard Filing Deadline

Form 706-NA must be filed within nine months after the decedent's date of death. This deadline applies regardless of whether the decedent died on January 1 or December 31—the clock starts ticking from the exact date of passing.

Extension Requests

If you need more time to gather documentation, obtain property appraisals, or complete the return accurately, you can request an automatic six-month extension using Form 4768 (Application for Extension of Time to File). However, this extension applies only to filing the return—not to paying any taxes owed. The full tax payment remains due within the original nine-month window, and interest accrues on unpaid amounts from that deadline forward.

Late Filing

If you miss the filing deadline without obtaining an extension, the IRS may accept a late return if you can demonstrate reasonable cause. However, late filing typically triggers penalties and interest charges that compound over time, making prompt action essential even when filing after the deadline.

Amended Returns

If you discover errors after filing—such as incorrect asset valuations, overlooked deductions, or missed documentation—you must file a supplemental Form 706-NA. To amend the return properly, write "Supplemental Information" across the top of page one, attach copies of pages one through four from the original return, and provide a detailed explanation of the changes. Common reasons for amendments include receiving updated appraisals, discovering additional U.S. assets, or claiming deductions that were initially overlooked.

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Key Rules or Details for 2017

Filing Threshold

For deaths occurring in 2017, Form 706-NA was required if the total value of U.S.-situated assets at death, combined with any adjusted taxable gifts and the gift tax specific exemption, exceeded $60,000. This threshold is dramatically lower than the $5.49 million exemption available to U.S. citizens and residents in 2017—a critical distinction that catches many foreign nationals by surprise.

Tax Rates

Estate tax rates for nonresident aliens in 2017 ranged from 18% on the first dollars over the exemption up to a maximum rate of 40% on amounts exceeding $1 million. The generation-skipping transfer tax, when applicable, was imposed as a flat 40% rate on top of estate taxes.

Unified Credit

Nonresident aliens received a unified credit of $13,000 in 2017, which effectively exempted the first $60,000 of U.S.-situated assets from taxation. However, unlike U.S. citizens who benefit from lifetime gift and estate tax coordination, this credit cannot be expanded through lifetime giving strategies.

No Portability

One of the most significant limitations for nonresident alien estates is the prohibition on portability elections. U.S. citizen couples can transfer any unused estate tax exemption from the first spouse to die to the surviving spouse, but this option is categorically unavailable when the decedent was neither a U.S. citizen nor resident at death—even if the surviving spouse is a U.S. citizen.

U.S.-Situated Assets

Only assets physically located in or connected to the United States are included in the taxable estate. This includes U.S. real estate, tangible personal property located in the U.S., shares of U.S. corporations, debt obligations of U.S. persons or entities, and bank accounts connected to a U.S. trade or business. Notably excluded are portfolio interest-generating securities, bank deposits not connected to a U.S. business, and certain life insurance proceeds.

Treaty Considerations

Many countries have estate tax treaties with the United States that may reduce tax liability, provide higher exemption amounts, or eliminate double taxation. If claiming treaty benefits, you must attach Form 8833 and include specific computations showing how the treaty applies.

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Step-by-Step (High Level)

Step 1: Determine Filing Requirement

Calculate the total fair market value of all U.S.-situated assets as of the date of death. Include real estate, brokerage accounts, business interests, and tangible property. If this amount plus any adjusted taxable gifts exceeds $60,000, Form 706-NA must be filed.

Step 2: Gather Essential Documentation

Collect the death certificate, decedent's will and any relevant trust documents, appraisals for all real property and business interests, brokerage statements showing values at date of death, prior U.S. gift tax returns (if any), and documentation establishing the decedent's nonresident status.

Step 3: Complete Form 706-NA Schedules

Schedule A lists all U.S. real estate with detailed property descriptions and valuations. Schedule B calculates allowable deductions including funeral expenses, administration costs, debts and mortgages, and applicable treaty benefits. Additional schedules cover stocks and bonds, business interests, and other asset categories.

Step 4: Calculate Tax Liability

Total the gross U.S. estate, subtract allowable deductions to arrive at the taxable estate, compute the tentative tax using the rate schedule, and apply the $13,000 unified credit (or treaty-based credit if applicable).

Step 5: Prepare Payment

If tax is owed, include payment with the return. The IRS accepts checks, money orders, and electronic payments. Write the decedent's name, date of death, and "Form 706-NA" on any check submitted.

Step 6: Submit the Return

Mail Form 706-NA with all required schedules, supporting documentation, and payment to the IRS address specified in the instructions. Currently, returns are sent to Department of the Treasury, Internal Revenue Service, Cincinnati, OH 45999.

Step 7: Obtain Transfer Certificates

U.S. financial institutions typically require proof that estate taxes have been addressed before releasing assets to foreign beneficiaries. While the IRS formerly issued estate tax closing letters, you can now request an account transcript through the Transcript Delivery Service or Form 4506-T to serve this purpose.

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Common Mistakes and How to Avoid Them

Mistake #1: Assuming No Filing Is Required

Many executors mistakenly believe that because the decedent lived abroad, no U.S. tax filing is necessary. Reality check: Even a single U.S. investment account or vacation property can trigger filing requirements if the total U.S. holdings exceed $60,000. Always inventory all U.S. assets regardless of where the decedent resided.

Mistake #2: Incorrect Asset Valuation

Using purchase prices or outdated appraisals rather than fair market value at date of death is a frequent error. The "fair market value" standard requires determining what a willing buyer would pay a willing seller, with both parties having reasonable knowledge and neither under compulsion. Obtain professional appraisals for real estate, business interests, and unique assets.

Mistake #3: Missing Required Documentation

Submitting Form 706-NA without attaching the death certificate, will, appraisals, and other supporting documents delays processing and may trigger penalties. Create a submission checklist and verify all attachments are included before mailing. If any document is in a foreign language, include a certified English translation.

Mistake #4: Failing to Claim Treaty Benefits

Many nonresident aliens qualify for reduced taxation or higher exemption amounts under estate tax treaties between the U.S. and their home country. Overlooking these provisions can result in overpayment. Research applicable treaties, complete Form 8833, and attach the required treaty computation to your return.

Mistake #5: Missing the Payment Deadline

Even when requesting a filing extension, the tax payment remains due within nine months of death. Requesting a filing extension does not extend the payment deadline. Pay estimated taxes by the original deadline to avoid interest charges, then file the complete return when the extension period expires.

Mistake #6: Not Coordinating with Income Tax Filings

Estates that sell U.S. real property or generate U.S.-source income must file Form 1040-NR (nonresident alien income tax return) in addition to Form 706-NA. These are separate obligations with different deadlines. The estate may also face 15% withholding on real estate sales under FIRPTA (Foreign Investment in Real Property Tax Act) rules, which can be credited on Form 1040-NR.

What Happens After You File

IRS Processing Timeline

After submission, the IRS assigns the return to the Estate and Gift Tax division for processing. Initial processing typically takes several months. During this period, the IRS validates the return information, checks calculations, and reviews supporting documentation.

Examination Selection

Some returns are selected for examination (audit) based on various risk factors including high asset values, complex deductions, treaty claims, or inconsistencies in reported information. If your return is selected, the IRS will contact you with a document request and examination timeline. You may represent yourself or designate a tax professional to handle the examination by completing Form 2848 (Power of Attorney).

Estate Tax Account Transcript

The IRS no longer routinely issues estate tax closing letters (Letter 627). Instead, you can obtain an account transcript showing the return was accepted and any balance due was paid. These transcripts are available through the Transcript Delivery Service for authorized practitioners or by submitting Form 4506-T. Financial institutions generally accept account transcripts as proof of tax compliance when releasing assets to foreign beneficiaries.

Closing Letter Fee

If you specifically need a formal closing letter rather than a transcript, you can request one by paying a user fee (reduced to $56 as of May 2025, though this information pertains to current rules rather than 2017). This request should be made at least nine months after filing the return.

Refund Processing

If you overpaid taxes, expect refund processing to take six months or longer. The IRS will mail refund checks to the executor's address shown on the return. Interest is paid on refunds if the processing delay exceeds certain thresholds.

Statute of Limitations

Generally, the IRS has three years from the filing date to assess additional taxes. This period extends to six years if the return substantially underreports the gross estate (by 25% or more), and remains open indefinitely if no return was filed when one was required.

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FAQs

Q1: What if the decedent owned U.S. property jointly with someone else?

How jointly-owned property is treated depends on the form of ownership and state law. If the decedent owned real estate as "joint tenants with right of survivorship" with a spouse, typically 50% of the value is included in the estate. For jointly-owned property with non-spouses, the portion attributable to the decedent's contributions is generally includible. Complex ownership situations require legal analysis, so consult with a tax professional to determine the correct includible amount.

Q2: Do bank accounts at U.S. banks count as U.S.-situated assets?

Generally, no—bank deposits in U.S. financial institutions held by nonresident aliens are not considered U.S.-situated assets for estate tax purposes, with one important exception: if the account was used in connection with a U.S. trade or business conducted by the decedent, it becomes includible in the gross estate.

Q3: Can the marital deduction reduce estate taxes for nonresident aliens?

Yes, but with limitations. If the surviving spouse is a U.S. citizen, property passing to them qualifies for the unlimited marital deduction, potentially eliminating estate tax. However, if the surviving spouse is not a U.S. citizen, the marital deduction is only available if the property passes to a Qualified Domestic Trust (QDOT) that meets specific IRS requirements for tax deferral.

Q4: What happens if I inherit property and then sell it?

When you inherit property, your tax basis is "stepped up" to the fair market value at the decedent's date of death. If you sell shortly after death, you typically have little or no capital gain. However, selling U.S. real property triggers FIRPTA withholding requirements—the buyer must withhold 15% of the sales price and remit it to the IRS. You can recover excess withholding by filing Form 1040-NR and claiming a refund.

Q5: Are there any assets exempt from U.S. estate tax even if they're in the U.S.?

Yes. Certain intangible assets are excluded even though they might seem U.S.-connected. These include portfolio interest from bonds and debt obligations (not owned by a 10% shareholder), life insurance proceeds where the insured was a nonresident alien, and deposits with U.S. banks not connected to a U.S. business. However, stocks of U.S. corporations are always included regardless of where the physical certificates are held.

Q6: Can I request an installment payment plan if the estate cannot pay immediately?

Yes, under certain circumstances. If the estate includes a closely-held business that represents at least 35% of the adjusted gross estate, you may qualify to pay estate taxes in installments over up to 14 years. However, interest accrues on deferred amounts, and strict qualification requirements apply. This option requires making a formal election on the return.

Q7: What if the decedent made gifts of U.S. property before death?

Lifetime gifts of U.S.-situated property by nonresident aliens are subject to separate gift tax rules with an annual exclusion ($14,000 in 2017). If the decedent filed U.S. gift tax returns (Form 709), these must be disclosed on Form 706-NA. Adjusted taxable gifts are added back when calculating whether the filing threshold is exceeded, though a credit is given to avoid double taxation.

Filing Form 706-NA requires careful attention to specialized rules that differ significantly from standard U.S. estate tax procedures. The combination of limited exemptions, complex asset-situs rules, and potential treaty benefits creates a landscape where professional guidance is often essential. When in doubt, consult with a tax attorney or CPA experienced in international estate taxation to ensure compliance and minimize tax liability.

Source: IRS.gov