Instructions for Form 706 (2018) Checklist
Introduction
This checklist reflects the 2018 revisions for Form 706 and applies to estates of decedents who died during that year under post-TCJA estate tax rules. It supports executor compliance for U.S.
estate filings, portability elections for married couples, and reporting of generation-skipping transfer matters at the time of death.
Why the State Issued This or Requires This
The federal government requires an estate tax return when filing thresholds are met or when a surviving spouse elects portability of the unused exclusion. Form 706 also captures generation-skipping transfer tax reporting for direct skips, skip individuals, and other transfers under sections governing taxable events at death.
What Happens If This Is Ignored
Failure to file when required may expose estates to penalties, interest, and delayed closing letters, affecting the administration of assets from stocks, real estate, and business property.
Failing to make portability elections can permanently forfeit unused exclusion amounts for married couples and complicate later refunds by estates or protective claim procedures.
Step-by-Step Checklist
Step 1: Confirm filing requirement and portability election
Determine whether the gross estate, prior federal gift history, and lifetime gift tax exclusion exceed the 2018 threshold requiring an estate tax filing. Even when no estate tax is due, evaluate portability elections carefully because a timely return preserves the unused exclusion for married couples.
Step 2: Verify domicile and correct return type
Confirm citizenship and domicile at the time of death because U.S. estate filing rules differ for nonresident decedents and foreign tax considerations. Use the proper return form and document facts supporting residency conclusions to reduce examination risk and support consistent reporting positions.
Step 3: Establish executor authority and signature responsibility
Gather court appointments, testamentary documents, and powers of appointment language establishing fiduciary jurisdiction over estates of decedents and irrevocable trust interests.
Ensure the authorized fiduciary signs and dates the return correctly, as signature errors delay processing and may affect refund claim procedures.
Step 4: Inventory the gross estate and organize valuation support
Compile worldwide assets, including joint property, insurance policy proceeds, type of annuity interests, and assets from mortgages held at death. Maintain documentation supporting fair market value for assets, including stocks, real estate, and business property, to support estate tax computations.
Step 5: Evaluate alternate valuation and apply consistently
Consider an alternate valuation only when it reduces both the gross estate value and the estate tax due under the election rules in the instructions. If chosen, apply the method consistently across all affected properties to avoid mismatches in tax computation and later amended filings.
Step 6: Complete schedules and place items correctly
Report assets and deductions on the correct schedules, including Schedule M for Marital
Deduction and R-1 (Form 706) PDF for Generation-Skipping Transfer matters. Avoid mixing property expenses, qualified payments, or administration expenses with asset entries, as misplacement can distort estate tax calculations.
Step 7: Report deductions, credits, and special elections
Claim allowable deductions such as the marital deduction, qualified conservation easement, and expenses during administration consistent with governing instruments and records. Evaluate credits, foreign taxes, and other adjustments carefully because they directly affect estate tax liability and potential refund by estates.
Step 8: Reconcile lifetime transfers and federal gift history
Gather prior Form 709 records to reconcile adjusted taxable gifts and federal gift transfers under sections governing unified transfer tax reporting. Accurate reconciliation strengthens the calculation of the applicable exclusion amount and reduces inconsistencies across gift and estate filings.
Step 9: Determine Generation-Skipping Transfer reporting responsibilities
Confirm whether the generation-skipping transfer tax applies to direct skips, transfers to a skip person, or funding of a dynasty trust. Ensure proper classification of skip generation transfers and identify whether executor or trustee reporting applies under generation-skipping transfer tax rules.
- Full IRS transcript retrieval (Wage & Income + Account)
- Professional tax form review
- Preparation & filing support
- Tax relief options if you owe the IRS
Step 10: File timely and request an extension if needed
File within nine months after death or submit an Application for Extension of Time using Form
4768 before the deadline. Retain proof of timely filing under Private Delivery Service standards and maintain records supporting tax advisor review and compliance documentation.
What Happens After This Is Completed
After filing, retain valuation workpapers, income statements, and supporting schedules in case the Service requests clarification or reviews taxable events. Processing may result in the issuance of a closing letter, and subsequent protective claim filings may be needed if adjustments arise.
Common Mistakes to Avoid
Common errors include failing to reconcile lifetime gift history, misreporting joint property, or omitting assets from mortgages and insurance policy proceeds. Other issues involve incorrect
Schedule M placement, incomplete R-1 reporting, or misunderstanding of generation-skipping transfer tax classifications for skip individuals.
Frequently Asked Questions
Is Form 706 required if no estate tax is owed?
A return may still be required to elect portability for married couples or to report certain generation-skipping transfer matters. Executors should document the rationale for filings to support consistent compliance positions and reduce audit exposure.
What assets are included in the gross estate?
The gross estate generally includes real estate, business property, joint property, insurance policy proceeds, and specific irrevocable trust interests. Valuation should reflect fair market value at the time of death and be supported by credible documentation.
When does the generation-skipping transfer tax apply?
Generation-skipping transfer tax may apply to direct skips, transfers to a skip person, or distributions from a dynasty trust. Executors must determine whether reporting belongs on Form
706 or separate trust filings.
Can an extension be requested?
Yes, Form 4768 allows an application for extension of time to file and, in some cases, to pay estate tax. An extension does not eliminate liability and should be filed promptly to preserve compliance.
Closing
Proper preparation of Form 706 supports accurate estate tax reporting, preserves portability, and ensures compliance with generation-skipping transfer tax rules. Careful documentation, timely filing, and coordination with a qualified tax advisor strengthen audit readiness and reduce long-term administrative risk.
If you’re missing tax documents or want to ensure the numbers you enter match IRS records, we can help.
