Form 706 Tax Year 2018 Compliance Checklist
Uniqueness of 2018 Form 706
For decedents dying after December 31, 2017, the 2018 Form 706 reflects the Tax Cuts and Jobs Act basic exclusion amount of $11,180,000, double the prior $5,490,000 threshold, with a corresponding basic credit amount of $4,417,800. Portability of Deceased Spousal Unused Exclusion (DSUE) amounts is integrated as a standard election in Part 6. The special use valuation ceiling is set at $1,140,000.
Section 6166 installment payment eligibility uses $1,520,000 as the threshold amount for calculating the 2% portion of deferred estate tax. The Tax Cuts and Jobs Act temporarily doubled the basic exclusion amount from $5 million indexed for inflation to $10 million indexed for inflation for estates of decedents dying after December 31, 2017, creating substantially higher filing thresholds and dramatically reduced estate tax liability for qualifying estates.
2018 Specific Programs Applicable to Form 706
Portability of DSUE amounts requires timely filing of Form 706 within nine months of the decedent’s death to allow the surviving spouse to use the decedent’s unused exclusion amount. Section 2032A special use valuation remains available for qualified real property used in a family farm or closely held business, with the 2018 ceiling of $1,140,000 enforced through Schedule A-1 and executed agreements signed by all qualified heirs.
Section 6166 installment payment elections are available for estates with closely held business interests exceeding 35% of the adjusted gross estate. The threshold calculation uses the $1,520,000 amount to determine the 2% portion eligible for reduced interest rates. Executors who did not have a filing requirement under section 6018(a) but failed to file Form 706 to make the portability election timely may be eligible for an extension under Revenue Procedure 2017-34, allowing filing on or before the later of January 2, 2018, or the second anniversary of the decedent’s death.
Ten-Step Compliance Checklist for 2018 Form 706
Step 1: Confirm Filing Requirement Based on 2018 Exclusion
Determine whether the decedent’s gross estate plus adjusted taxable gifts (as defined in section 2503 for gifts made after December 31, 1976) exceeds the 2018 basic exclusion amount of $11,180,000, or whether the executor elects to transfer DSUE to a surviving spouse regardless of gross estate value. Form 706 must be filed by U.S. citizens or residents who meet either threshold.
Calculate the gross estate to include all property in which the decedent had any interest, certain transfers during life without adequate consideration, annuities, jointly owned property, life insurance proceeds, property subject to powers of appointment, and community property interests.
Step 2: Verify Decedent Status and Complete Part 1
Confirm decedent was a U.S. citizen or resident at the date of death. Nonresident aliens use Form 706-NA. Enter decedent’s name, Social Security number, date of death, and domicile on Part 1, lines 1 through 7. Attach a certified copy of the will if the decedent died testate. Attach the death certificate. Provide executor documentation, including a certified copy of the will or a court order designating executor status. If multiple executors exist, all must be identified by name, address, and Social Security number on the attached statements.
Step 3: Obtain the Estate Employer Identification Number
File Form SS-4 or apply online to obtain an EIN for the estate if not already assigned. The EIN is required for identification purposes throughout the Form 706 filing process and is used on all schedules and supporting documents. The EIN is separate from the decedent’s Social Security number and identifies the estate as a taxable entity.
Step 4: Gather and Itemize All Gross Estate Assets
Compile complete documentation for all property in which the decedent had any interest at the date of death, including real estate, stocks, bonds, mortgages, notes, cash, life insurance, jointly owned property, transfers during life under sections 2035 through 2038, annuities, and property subject to powers of appointment. Obtain qualified appraisals or valuations for real property and business interests. Use the date of death for the fair market value of securities. Prepare Form 712 for each life insurance policy included in the gross estate.
Step 5: Complete Schedules A Through I for Part 5 Recapitulation Items 1 Through 9
File Schedule A (Real Estate), Schedule B (Stocks and Bonds), Schedule C (Mortgages, Notes, and Cash), Schedule D (Insurance on Decedent’s Life), Schedule E (Jointly Owned Property), Schedule F (Other Miscellaneous Property), Schedule G (Transfers During Decedent’s Life), Schedule H (Powers of Appointment), and Schedule I (Annuities) as applicable.
Each schedule’s totals correspond to numbered items 1 through 9 of Part 5. If any item 1 through 9 of Part 5 is entered as zero, the corresponding schedule need not be filed except Schedule F, which must be filed when Form 706 is completed, regardless of value.
Step 6: Determine Alternate Valuation Election (Part 3, Line 1)
If property values declined within six months of death and the estate will benefit from lower valuations, elect alternate valuation. If elected, property is valued as of six months after the date of death except for property distributed, sold, exchanged, or otherwise disposed of within six months, which is valued on the date of disposition.
Alternate valuation cannot be elected unless it decreases both the gross estate and the sum of estate and GST taxes. Once made, an election is irrevocable and applies to all property in the gross estate. Both the date of death value and alternate value columns must be completed on each schedule.
Step 7: Calculate Total Gross Estate and Enter Part 5, Item 13
Sum all scheduled totals (items 1 through 10 of Part 5) to determine the total gross estate. Enter the total on Part 5, line 11. If a qualified conservation easement exclusion is claimed under section 2031(c), complete Schedule U and enter the exclusion amount on Part 5, item 12. Subtract item 12 from item 11 and enter the result on Part 5, item 13. The conservation easement's exclusion is limited to 40% of the land's value.
Step 8: Complete Deduction Schedules and Part 5 Items 14 Through 24
File Schedule J (Funeral Expenses and Administration Expenses Subject to Claims), Schedule K (Debts and Mortgages/Liens), Schedule L (Net Losses and Expenses Not Subject to Claims), Schedule M (Marital Deduction for Bequests to Surviving Spouse), and Schedule O (Charitable Gifts).
Enter each schedule total on the corresponding Part 5 items 14 through 22. State death taxes paid to any state or the District of Columbia are claimed as a deduction on Part 2, line 3b. Sum all deductions on Part 5, item 24, and enter on Part 2, line 2. Ensure that all deductions are adequately substantiated with supporting documentation.
Step 9: Complete Part 2 Tax Computation Using 2018 Thresholds and Table A
Enter total gross estate less exclusion (Part 5, item 13) on Part 2, line 1. Enter tentative total deductions (Part 5, item 24) on line 2. Calculate the taxable estate on line 3. Enter adjusted taxable gifts on line 4 (sum of taxable gifts made after 1976 and specific exemption under section 2521). On lines 9a through 9e, enter the basic exclusion amount of $11,180,000 (line 9a), any DSUE amount received from a predeceased spouse (line 9b), and calculate the applicable exclusion (line 9d as the sum of 9a, 9b, and 9c).
Calculate the applicable credit amount on line 9e using the Table A unified rate schedule (tax on the line 9d amount). The maximum basic credit amount for 2018, without a DSUE adjustment, is $4,417,800. Enter allowable credit on line 11 and compute net estate tax on line 12.
Step 10: Complete Part 6 (DSUE Portability) if Surviving Spouse Exists; Sign and Assemble
If the decedent had a surviving spouse at the date of death, complete Part 6 to elect or opt out of DSUE portability. Filing a timely and complete Form 706 with a DSUE amount will be considered an election to transfer the DSUE amount to the surviving spouse. An executor who does not wish to elect portability must affirmatively opt out in Part 6, Section A. If electing, calculate the DSUE amount portable to the surviving spouse (Part 6, Section C).
If filing solely for portability and the gross estate does not exceed $11,180,000, executors are not required to report the value of particular property eligible for the marital or charitable deduction under the special rule of Regulations section 20.2010-2(a)(7)(ii). However, estimated values must be included in gross estate totals.
The Executor must sign Part 1 under penalties of perjury. If a paid preparer is used, the preparer must sign Part 4 and include the PTIN. Assemble all four pages of Form 706 and all required schedules in numerical order with the death certificate and certified will attached.
2018 Form Design Changes and Clarifications
Part 6 Portability of DSUE
Prior instruction: Earlier forms required separate election filing and calculation without dedicated integrated sections on Form 706.
Current 2018 instruction: Part 6 provides a comprehensive three-section framework (Opting Out, Qualified Domestic Trust, and DSUE Calculation) directly on Form 706. The portability election is automatic if the return is filed on time. The executor needs only to opt out or complete sections B and C if applicable. This consolidates the election process and clarifies that no separate application is required if the return is filed within nine months of the date of death.
Change type: Redesigned
Line 9a Basic Exclusion Amount Threshold
Prior instruction: Line 9a reflected a lower basic exclusion amount ($5.49 million in 2017, indexed annually).
Current 2018 instruction: Line 9a enters the 2018 basic exclusion amount of $11,180,000, effective for all decedents dying after December 31, 2017. This reflects the Tax Cuts and Jobs Act doubling of the threshold and directly affects filing requirements, applicable credit calculation, and taxable estate determination across all computations.
Change type: Updated
Schedule A-1 Special Use Valuation Agreement
Prior instruction: Schedule A-1 requires signatures from all qualified heirs, with the ceiling indexed and stated on the previous year’s instructions.
Current 2018 instruction: Schedule A-1 ceiling is explicitly stated as $1,140,000 for 2018. The agreement requirement remains mandatory, with each qualified heir receiving specially valued property signing an agreement on Schedule A-1, consenting to personal liability for additional estate tax if the property is disposed of or ceases to qualify for special use treatment within ten years after death.
Change type: Clarified
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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.
