Form 706 is the federal estate tax return used to report the value of a decedent’s estate and determine whether any estate tax is owed. It ensures that the Internal Revenue Service receives accurate information about the estate’s assets, deductions, and tax liability under the Internal Revenue Code. Executors or administrators are responsible for filing this form when the total value of the decedent’s estate meets or exceeds the federal estate tax exemption limit for the year of death. For the estates of individuals who died in 2019, the exemption threshold was $11.4 million.
The filing process involves more than simply filling out a form—it requires detailed estate documentation and a clear understanding of the decedent’s assets, debts, and lifetime gifts. Executors must report all property owned by the decedent, including real estate, investments, and personal property, using fair market value as of the date of death or an alternate valuation date. This information helps calculate the gross estate and determine the taxable estate after allowable deductions.
Because Form 706 can affect both the estate’s overall tax obligations and the surviving spouse’s future exemption, accuracy is essential. This guide simplifies the 2019 filing requirements, helping executors manage estate administration, avoid common mistakes, and stay compliant with Internal Revenue Service regulations.
Understanding Form 706 and Its Purpose
Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, is used to report and calculate the federal estate tax owed by a decedent’s estate. It ensures that the Internal Revenue Service receives a complete record of the estate’s assets, liabilities, deductions, and any taxable transfers. Executors use this form to comply with federal reporting rules under Chapter 11 of the Internal Revenue Code.
What Is Form 706 Used For?
- To calculate and report the total federal estate tax owed based on the gross estate and allowable deductions.
- To determine the generation-skipping transfer tax for transfers to grandchildren or future generations.
- To elect the deceased spousal unused exclusion (DSUE) amount for a surviving spouse.
- To report lifetime taxable gifts that affect the estate’s total value.
- To make various elections that can impact estate tax liability, such as the alternate valuation or portability election.
Who Must File?
- Executors or administrators of estates for decedents who were U.S. citizens or residents at the time of death.
- Estates with a total gross estate and adjusted taxable gifts exceeding the basic exclusion amount of $11.4 million for 2019.
- Executors who wish to elect portability of the DSUE amount to a surviving spouse, regardless of estate size.
Form 706 is crucial for accurately reporting the estate's value and ensuring compliance with federal estate tax laws and regulations. Filing correctly helps prevent penalties, supports estate administration, and provides transparency in settling the decedent’s tax obligations under the Internal Revenue Code.
Key Updates for the 2019 Tax Year
Several vital updates affected estates filing Form 706 for decedents dying in 2019. These changes involved increased exemption limits, adjusted valuation thresholds, and modifications to the filing address that executors needed to follow to ensure the timely submission of their returns.
Updated Exemption and Credit Amounts
- The basic exclusion amount increased to $11.4 million.
- The corresponding basic credit amount increased to $4,505,800.
- The special-use valuation ceiling was adjusted to 1,160,000 dollars, impacting family farms and closely held businesses.
- The 2 percent portion threshold for installment payments increased to 1,550,000 dollars, helping larger estates plan more manageable payments.
Filing Address Changes
- Original estate tax returns were mailed to Kansas City, Missouri.
- Amended or supplemental returns were directed to Florence, Kentucky.
- Executors had to confirm the correct address to avoid delays in processing by the Internal Revenue Service.
Schedule R-1 Update
Schedule R-1, used for reporting generation-skipping transfer tax, became a separate form in 2019. Executors were required to obtain and file this schedule independently when applicable.
These revisions reflect the government’s adjustments under the Tax Cuts and Jobs Act, designed to align exemption limits and valuation rules with inflation and evolving estate administration requirements.
Step-by-Step Filing Instructions
Filing Form 706 involves several detailed steps that ensure accurate reporting of estate assets, deductions, and elections under the Internal Revenue Code. Executors should complete each step carefully to comply with federal estate tax requirements.
Step 1 – Gather Required Documents.
Executors must collect the following documents before preparing the return:
- Certified copy of the death certificate and will.
- All prior gift tax returns (Forms 709) filed by the decedent.
- Life insurance policy statements and completed Form 712 for each policy.
- Financial records, account statements, and appraisals of property acquired.
- Trust instruments, partnership agreements, and powers of appointment.
Step 2 – Determine Filing Requirements.
An estate must file Form 706 if the gross estate, adjusted taxable gifts, and specific exemptions exceed the basic exclusion amount of $11.4 million. Filing is also required to elect portability of the deceased spousal unused exclusion amount, even if no tax is due.
Step 3 – Value the Estate’s Assets.
Executors must determine fair market value as of the decedent’s date of death or use the alternate valuation method if it reduces both the total value and tax liability. Assets typically include:
- Real estate, including family farms and investment properties
- Stocks, bonds, and other securities
- Business interests or partnerships
- Personal property such as vehicles, jewelry, or art
- Annuities and insurance proceeds payable to the estate
Step 4 – Complete Required Pages and Schedules.
All filers must complete pages one through four of the form and include any applicable schedules. Each entry should consist of an amount or zero to prevent processing delays. Executors must review all schedules for accuracy, particularly those affecting deductions, portability elections, or special-use valuations.
A complete and accurate return helps minimize disputes, avoid litigation involving asset valuation, and ensure compliance with Internal Revenue Service procedures.
Filing and Payment Procedures
Form 706 must be filed on paper for the 2019 tax year, as electronic submission was not available at the time of filing. Executors must verify that the return is signed, dated, and mailed to the correct Internal Revenue Service address.
Filing Method and Address
- Original returns: Kansas City, Missouri
- Amended or supplemental returns: Florence, Kentucky
Executors using private delivery services should confirm that the approved carriers listed on the IRS website are suitable, as specific addresses may not be able to receive courier deliveries.
Payment of Estate Tax
Estate tax payments are due within nine months after the decedent’s death. Payments may be made by check or electronically through the Electronic Federal Tax Payment System. Executors should include the decedent’s name, Social Security number, and “Form 706” on all checks to ensure proper credit.
Extensions and Special Circumstances
- Executors may request an automatic six-month extension to file using Form 4768.
- This extension does not postpone payment; unpaid tax continues to accrue interest.
- Under Section 6166, estates that include closely held business interests may elect to pay in installments.
- Section 6163 allows postponement of tax related to reversionary or remainder interests when justified by undue hardship.
Following proper filing and payment procedures prevents penalties and supports smooth estate administration for executors managing federal estate tax obligations.
Required Schedules and Attachments
Form 706 requires executors to complete specific schedules and attach essential documentation to verify the estate’s reported values. Each schedule provides detailed information on various categories of assets, deductions, and credits that comprise the taxable estate.
Mandatory Schedules and Pages
- Pages 1–4 of Form 706 must always be completed.
- Schedule F must be included for miscellaneous property items.
- Schedule A lists real estate and must be filed if the decedent owned property.
- Schedule B reports stocks, bonds, and securities.
- Schedule D covers life insurance policies payable to the estate.
- Schedule M reports property qualifying for the marital deduction.
- Schedule O reports charitable deductions.
Required Attachments
Executors must also attach supporting documentation to substantiate reported amounts:
- Certified copy of the death certificate
- Copies of the will, trust agreements, and codicils
- Form 709, reporting lifetime taxable gifts
- Form 712, detailing life insurance policy values
- Appraisals for real estate, business interests, or unique assets
- State death tax receipts and proof of payment
Proper documentation ensures compliance with Internal Revenue Service standards and prevents delays in processing or challenges to reported estate value. Executors should maintain copies of all submitted materials as part of the estate’s permanent records.
DSUE and Portability Election Explained
The deceased spousal unused exclusion (DSUE) allows a surviving spouse to use the remaining portion of the decedent’s basic exclusion amount. This portability election can significantly reduce estate tax liability for married couples, ensuring that unused exemptions from one spouse are not lost.
How DSUE Portability Works?
- If the first spouse’s taxable estate does not use the full exclusion, the unused portion transfers to the surviving spouse.
- The surviving spouse can combine their own exclusion with the DSUE amount for future estate or gift tax purposes.
- Only the most recently deceased spouse is available for transfer in cases of remarriage.
How to Elect Portability?
- Executors must file a timely and complete Form 706, even if no tax is owed.
- Part 6 of the form must be completed, including sections on portability elections and DSUE calculations.
- To opt out of portability, the executor must check the appropriate box in Section A.
- For estates missing the deadline, relief may be available under Revenue Procedure 2017-34 if filing occurs within two years of death.
Electing portability helps surviving spouses preserve the full value of the federal estate tax exemption. Executors should confirm accuracy when determining the DSUE to prevent future tax complications.
Common Filing Errors and How to Avoid Them
Form 706 requires precision, and even minor errors can result in delays, penalties, or additional scrutiny from the Internal Revenue Service. Executors can prevent common mistakes by following best practices and verifying every section of the return before submission.
Frequent Errors
- Leaving blank fields or omitting schedules instead of entering zeros.
- Using incorrect addresses for filing original or amended forms.
- Misstating asset values or using purchase price instead of fair market value.
- Claiming duplicate deductions on both Form 706 and Form 1041.
- Missing deadlines for portability elections or payment extensions.
Best Practices for Accuracy
- Review each calculation and supporting document carefully.
- Confirm that all attachments, appraisals, and schedules are included.
- Ensure consistent asset valuation dates and formats are used.
- Double-check the executor’s signature and identifying information.
Completing the federal estate tax return correctly helps prevent unnecessary correspondence with the IRS and ensures a smooth estate administration process for all parties involved.
Asset Valuation and Appraisal Tips
Accurate valuation of estate assets is essential for determining the correct taxable estate and ensuring compliance with Internal Revenue Service requirements. Executors must use fair market value as of the decedent’s date of death or apply alternate valuation if it results in a lower estate tax liability.
Valuation Methods
- Fair market value: This is the price that a willing buyer and a willing seller would agree upon when neither party is under any compulsion to act and both have reasonable knowledge of relevant facts.
- Alternate valuation: This method allows executors to value the estate six months after the decedent’s death, provided that doing so reduces both the gross estate and the overall federal estate tax liability.
- Special-use valuation: This applies to qualified real property, such as a family farm or closely held business, and allows valuation based on the property’s actual use rather than its highest and best use under Section 2032A of the Internal Revenue Code.
Common Asset Categories
- Real estate: Each property must be appraised by a qualified professional who considers comparable sales, income potential, and any restrictions or encumbrances that affect its value.
- Securities: Publicly traded stocks are valued at the mean between the highest and lowest selling prices on the date of death or the alternate valuation date if elected.
- Business interests: These should be appraised using recognized valuation methods, taking into account the company’s income, asset base, market position, and overall economic conditions.
- Personal property: This includes items such as jewelry, vehicles, collectibles, and artwork, which must be valued using recognized market guides or professional appraisals to ensure accuracy and reliability.
Executors should keep detailed records of all valuation reports and supporting documentation. Accurate and well-documented valuations help establish the estate’s fair market value, reduce the risk of disputes or litigation involving asset worth, and ensure compliance with Internal Revenue Service requirements.
When to Seek Professional Help?
Filing a federal estate tax return can be complex, especially when an estate includes multiple assets, business interests, or international holdings. Executors may benefit from assistance by experienced professionals who understand both tax law and estate administration.
Professionals to Consider
- Certified public accountant (CPA): A CPA helps executors calculate the adjusted gross estate, prepare IRS forms, and confirm that deductions and elections comply with the Internal Revenue Code.
- Tax attorney: A tax attorney advises on complex estate tax issues, including portability elections and generation-skipping transfer tax, and represents the estate in disputes with the Internal Revenue Service.
- Qualified appraiser: A qualified appraiser determines accurate fair market values for real estate, business interests, and personal property in compliance with IRS valuation standards.
- Financial advisor: A financial advisor helps manage estate assets, plan for tax payments, and coordinate strategies that support beneficiaries.
Working with experienced professionals ensures accurate filings, timely compliance, and smoother estate administration for executors handling federal estate tax matters.
Frequently Asked Questions
What is Form 706, and who must file it?
Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, is required for estates with a gross estate and adjusted taxable gifts exceeding the federal estate tax exemption limit. Executors must also file if they elect portability of the deceased spousal unused exclusion. It reports the estate’s assets, deductions, and any taxable transfers in accordance with the Internal Revenue Code.
How is fair market value determined for estate assets?
Fair market value is the price a willing buyer would pay a willing seller when neither is under pressure to act. Executors must use this value as of the decedent’s date of death or an alternate valuation date. The Internal Revenue Service allows alternate valuation when it lowers both the total estate value and the federal estate tax liability.
What is the federal estate tax exemption for 2019?
For decedents dying in 2019, the basic exclusion amount was $ 11.4 million. This exemption represents the portion of the decedent’s estate that is not subject to federal estate tax. Executors should calculate the total estate value, including taxable gifts, to determine whether the estate exceeds the federal exemption limit before filing the return.
What is the purpose of the DSUE portability election?
The portability election allows a surviving spouse to use the deceased spouse's unused exclusion from the predeceased spouse’s estate. Executors make this election by filing Form 706, even if no tax is due. The election helps preserve the unused portion of the federal estate tax exemption for future estate or gift tax purposes.
What is the difference between gross estate and taxable estate?
The gross estate includes the total value of all property, assets, and lifetime gifts owned by the decedent at death. The taxable estate is determined after subtracting allowable deductions such as debts, administration expenses, and charitable or marital transfers. These values are essential in calculating the estate’s overall tax liability under the Internal Revenue Code.
What happens if the executor cannot file within nine months?
If additional time is needed, the executor may request an automatic six-month extension to file Form 706 using Form 4768. However, this extension does not delay payment of the estate tax. Interest and penalties may accrue if payment is not made by the due date, even when the filing deadline is extended.
