Instructions for Form 706 (2016) Checklist
Purpose and scope
Form 706 is the United States Estate (and Generation-Skipping Transfer) Tax Return used to report a decedent’s gross estate and compute federal estate tax and generation-skipping transfer tax for deaths occurring in 2016. It applies to U.S. citizens and residents and reflects the estate tax exemption, applicable tax rate, and transfer tax rules in effect for that year.
The return also supports estate and gift tax coordination, including portability elections and reconciliation of prior gift tax reporting on Form 709. It does not address individual income tax items or non-estate filing programs.
Filing context and recent developments
For 2016 decedents, filing may be required because the gross estate exceeds the federal estate tax exemption or because the executor elects portability to preserve unused exclusion for a surviving spouse. Recent developments following the American Taxpayer Relief Act of 2012 continue to influence exemption levels and unified estate and gift tax credit calculations.
Executors should confirm filing requirements early, especially when trust terminations, split gifts, or generation-skipping transfer arrangements are involved. Careful preparation reduces the risk of additional tax due, penalties, or delays with the Internal Revenue Service.
Ten-step filing checklist
Step 1: Confirm filing requirements and purpose
Determine whether the estate tax return is required because the gross estate plus adjusted taxable gifts exceeds the filing threshold or because a portability election is desired. Confirm the decedent’s Social Security number, date of death, and U.S. residency status for estate tax purposes.
Clarify whether the return is filed to report estate tax due or solely to elect portability under the unified estate and gift tax credit. Document the purpose of the filing clearly in the estate administration records.
Step 2: Select the valuation method and apply consistently
Use fair market value as of the date of death unless an alternate valuation election is made under the Form 706 instructions. If alternate valuation is elected, apply it consistently across all includible assets.
Decide the valuation approach before completing Schedule A through Schedule I to avoid inconsistencies. Retain appraisals, brokerage statements, and valuation workpapers supporting the chosen method.
Step 3: Complete the core return information first
Prepare the primary pages of Form 706, including Part 1 identification entries and executor information, using details that match the death certificate and estate documents. Confirm executor authority and list additional executors when required by the instructions.
If a paid preparer assists, complete preparer disclosures accurately and ensure the executor receives a full copy of the estate tax return. Consistent identification prevents processing delays.
Step 4: Inventory assets and assign correct schedules
List all includible decedent’s assets and assign each item to the proper schedule, such as
Schedule A for real estate and Schedule B for stocks and bonds. Use Schedule C for cash and receivables, keeping debts separate.
Report life insurance proceeds on Schedule D with Form 712 from insurance companies when required. Use Schedule E for jointly owned property, Schedule F for miscellaneous assets, and
Schedule G for includible lifetime transfers.
Step 5: Separate assets from deductions
Maintain separate workpapers for gross estate assets and deductible expenses to prevent misclassification. This distinction helps ensure accurate estate tax computation and proper placement on the schedule.
Do not report debts, mortgages, or claims on asset schedules. Deductible obligations belong on
Schedule K and related deduction schedules only.
Step 6: Report deductions using proper schedules
Claim funeral and administration expenses on Schedule J and report debts and liens on
Schedule K with supporting documentation. Use Schedule L for post-death losses and expenses tied to property not subject to claims.
Report marital deduction property on Schedule M and charitable transfers on Schedule O, ensuring governing trust arrangements or will provisions support each deduction. Accurate categorization avoids disallowance.
Step 7: Apply credits and transfer tax adjustments
Compute the unified estate and gift tax credit using the federal estate tax exemption applicable for 2016, adjusting for prior gift tax reporting on Form 709. Reconcile split gifts and annual exclusion amounts carefully.
Claim other credits only when applicable, such as the foreign death tax credit on Schedule P.
The state death tax deduction is handled within the tax computation, not as a credit.
Step 8: Complete GST reporting when applicable
Identify generation-skipping transfer events, including direct skips and trust terminations, that trigger generation-skipping transfer tax reporting. Evaluate trust arrangements, dynasty trusts, and GST exemption allocation issues.
Complete Schedule R and Schedule R-1 only when required by the facts and instructions.
Ensure GST tax computations align with the concepts in section 2612 and estate-level reporting rules.
Step 9: Assemble supporting documents and reconcile totals
Assemble all schedules, continuation sheets, and required attachments in the order prescribed by the instructions. Include the death certificate, will, appraisals, Forms 712, and prior Form 709 documentation when relevant.
Reconcile schedule totals with the recapitulation section to confirm internal consistency. Review calculations to ensure taxable estate and tax due figures are accurate.
- Full IRS transcript retrieval (Wage & Income + Account)
- Professional tax form review
- Preparation & filing support
- Tax relief options if you owe the IRS
Step 10: Sign, file, and retain records
Ensure the executor signs the return under penalties of perjury and completes all required signature fields. Verify dates and identification entries before submission.
File Form 706 within nine months of death or request an extension using Form 4768 when necessary. Retain proof of filing and a complete copy for estate administration and future reference.
Special note on nonresident estates
Form 706 applies only to estates of U.S. citizens or residents; nonresident estates generally follow different transfer tax rules and filing forms. Confirm domicile and residency early to avoid incorrect filings.
When cross-border assets or Canadian marital credit considerations arise, consult a tax professional experienced in federal estate and gift taxes. Proper classification protects the estate from unnecessary compliance issues.
Final review before submission
Confirm that every reported asset has valuation support and that each deduction is properly documented and categorized. Review recent developments and instructions to ensure compliance with 2016 requirements.
A final review by an estate attorney or tax professional can help address complex trust arrangements, generation-skipping transfer exposure, or filing logistics. Organized records simplify future correspondence with the Internal Revenue Service.
If you’re missing tax documents or want to ensure the numbers you enter match IRS records, we can help.
