Form 706 (Rev. August 2011) Tax Year 2011 Checklist
Uniqueness Summary
The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 reinstated the federal estate tax for 2011 at a 35% flat rate on transfers exceeding the $5,000,000 exclusion amount, making 2011 the first year that portability of deceased spousal unused exclusion became electable on Form 706. The filing threshold and tax rates established for 2011 differ markedly from those of both the preceding year, 2010 (when the estate tax was repealed), and subsequent years.
Form 706 must report this single exclusion amount, not a prior-law option to elect out or carryover basis treatment. The unified credit of $1,730,800 corresponds to the $5,000,000 basic exclusion amount, providing estates with substantially higher exemptions than the pre-2010 regime.
Year-Specific Programs Applicable To 2011
Form 706
The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 reinstated the estate tax, effective January 1, 2011, with a $ 5 million basic exclusion amount and a 35% maximum tax rate. The law allowed estates of decedents surviving a spouse dying on or after January 1, 2011, to elect portability of the deceased spousal unused exclusion amount on a timely filed Form 706, regardless of whether the estate owed any tax.
Executors of 2011 decedents may not elect out of the estate tax or use carryover basis treatment, which was available only for 2010 decedents. All 2011 Form 706 filers must compute estate tax using the unified rate table and the $5,000,000 exclusion. The annual gift tax exclusion remained at $13,000 per donee for 2011, consistent with the levels of 2009 and 2010.
Ten-Step Checklist For Form 706 (Rev. August 2011)
Step 1: Determine Filing Requirement and Gather Essential Documents
Form 706 must be filed if the decedent’s gross estate plus adjusted taxable gifts and specific exemption exceeds $5,000,000 for 2011 decedents, or if the executor elects portability of the deceased spouse’s unused exclusion to benefit the surviving spouse.
Gather the decedent’s death certificate, a certified copy of any will (or explanation if not certified), and documentation establishing executor status, such as court orders or letters testamentary. All executors must provide documentation proving their appointment and authority to act on behalf of the estate.
Step 2: Collect Asset Information and Obtain Professional Valuations
Get appraisals for all estate assets, such as real estate, stocks, bonds, mortgages,notes, cash, life insurance policies, jointly owned property, powers of appointment, annuities, and other various items to be listed on Schedules A through I.
A fair market value at the date of death (or an alternate valuation date if elected) must be documented for every asset included in the gross estate. Engage qualified appraisers for real estate, business interests, and other complex assets requiring professional valuation expertise.
Step 3: Account for Adjusted Taxable Gifts Made After December 31, 1976
Locate all prior Forms 709 filed by the decedent throughout their lifetime and identify any taxable gifts in excess of the annual exclusion that were not reported on Form 709
but should have been included. The annual exclusion for 2011 was $13,000 per done.
Gifts below this amount to each done do not reduce the $5,000,000 exclusion or require reporting. Complete Worksheet TG (Taxable Gifts Reconciliation) to account for all lifetime taxable gifts properly.
Step 4: Calculate Gross Estate on Part 5 Recapitulation
Complete Part 5, items 1 through 9, by totaling all assets from Schedules A through I to arrive at item 10 (total gross estate). Complete Schedule U if the estate elects to exclude any qualified conservation easement under section 2031(c)(6). Subtract any Schedule U exclusion on item 11 to arrive at the total gross estate less exclusion on item 12, which carries to Part 2 Tax Computation, line 1.
Step 5: Complete All Applicable Deduction Schedules
Schedule J reports funeral expenses and administration expenses subject to claims against the estate. Schedule K reports the debts of the decedent, as well as mortgages and liens that are outstanding. Schedule L reports net losses during administration and costs incurred in administering property not subject to claims. Schedule M reports marital deduction bequests to the surviving spouse.
Schedule O reports charitable gifts and bequests. Summarize all deductions in Part 5, items 13 through 21, and enter the total on item 22, which is then carried to Part 2, line 2. State death taxes paid are claimed as a deduction on Part 2, line 3b (not as a credit) for 2011 estates.
Step 6: Determine Whether to Elect Alternate Valuation or Special Use Valuation
If alternate valuation is elected on Part 3, line 1, it must apply to all property in the gross estate and must decrease both the gross estate and the total estate and GST taxes. Property is valued as of six months after the date of death. If special-use valuation under section 2032A is elected on Part 3, line 2, complete Schedule A-1 with all qualified real property descriptions, material participation affidavits demonstrating active
farming or business use, and the Part 3 agreement signed by all heirs and interested parties. The maximum reduction in value for 2011 is $1,020,000.
Step 7: Calculate Estate Tax in Part 2 Tax Computation Using Table A
Add line 3c (taxable estate) and line 4 (adjusted taxable gifts) on line 5. Apply Table A (Unified Rate Schedule) to compute the tentative tax on line 6. Subtract line 7 (gift taxes paid on gifts after December 31, 1976, calculated using 2011 rates) to compute the tentative estate tax on line 8. Apply the maximum unified credit of $1,730,800 for 2011 on line 9. Adjust on line 10 for any specific exemption claimed for gifts made after September 8, 1976, and before January 1, 1977 (adjustment limited to 20% of the particular exemption, with a maximum reduction of $6,000).
Step 8: Claim Credits for Foreign Death Taxes and Prior Transfers
Complete Schedule P (Credit for Foreign Death Taxes) if the estate paid estate, inheritance, legacy, or succession taxes to any foreign country as a result of the decedent’s death. Attach Form 706-CE (Certificate of Payment of Foreign Death Tax) for each foreign country. Complete Schedule Q (Credit for Tax on Prior Transfers) if property was transferred to the decedent from someone who died within ten years before or two years after the decedent, and estate tax was paid on the prior transfer. Enter the total of Schedule P and Schedule Q credits on line 15.
Step 9: Complete Schedule R for Generation Skipping Transfer Tax If Applicable
Calculate the generation-skipping transfer tax if the estate makes direct skips, which are transfers to skip persons (grandchildren or more remote descendants, or unrelated persons more than 37.5 years younger than the decedent) of interests in property included in the gross estate. Compute the tentative GST tax using the flat 35% rate, apply the $5,000,000 GST exemption (with an applicable credit of $1,730,800), and determine the GST tax payable on Schedule R, Part 2, line 10, which carries over to Form 706, line 17.
Step 10: Sign, Assemble, and File the Complete Return Package
The executor must sign Part 4 under penalty of perjury. If a paid preparer prepared the return, the preparer must sign in the "Paid Preparer Use Only" area and complete all required information, including the PTIN. Attach the death certificate (required), the certified will if testate, all supporting schedules (A through U as applicable), Schedule P and/or Schedule Q if claiming foreign death tax credits or prior transfer credits, Form 712 (Life Insurance Statement) for all life insurance policies, and any prior Forms 709 marked as exhibits.
File within nine months of the decedent’s date of death at the IRS Cincinnati Service Center. Request an automatic six-month extension using Form 4768 if additional time is needed.
Significant Changes In Form 706 Instruction For 2011
Treatment of Portability Election
Prior-year instruction: Not applicable. Portability of a deceased spouse's unused exclusion was not available before January 1, 2011.
Current 2011 instruction: Form 706 must be filed timely to elect portability of the decedent’s unused exclusion to the surviving spouse, regardless of the size of the gross estate. This allows the surviving spouse to add the decedent’s unused portion of the $5,000,000 exclusion to their own applicable exclusion amount.
Change type: Added
Reinstated Estate Tax and Unified Rate Structure
Prior-year instruction: In 2010, decedents had no federal estate tax filing requirement absent a carryover basis election was made. No unified credit applied.
Current 2011 instruction: All 2011 decedents with gross estates exceeding $5,000,000 are subject to a 35% flat rate. Unified credit of $1,730,800 applies. No election out of the estate tax is available.
Change type: Updated
Inflation-Adjusted Dollar Amounts for 2011
Prior-year instruction: Special-use valuation ceiling and installment payment thresholds were lower in prior years.
Current 2011 instruction: The ceiling on special-use valuations under Section 2032A is $1,020,000. The amount used to calculate the 2% portion of the estate tax payable in installments is $1,360,000. Basic exclusion amount is $5,000,000.
Change type: Updated
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This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance.
