Form 706 (2021): U.S Estate & GST Tax Return
Checklist
This checklist provides a corrected, year-specific guide for preparing a 2021 estate tax return using IRS Form 706. It applies to estates of decedents who were U.S. citizens or U.S. residents at death and focuses on the federal estate tax, GST tax at death, and required elections.
Form 706 is a transfer tax return governed by chapter 11 and chapter 13 rules. It is separate from income tax filings and is used to measure tax liability based on the gross estate, deductions, and applicable exemption amount in effect for 2021.
Return Type and Filing Scope for 2021
Form 706 applies when the decedent was a U.S. citizen or resident, and the filing process meets statutory filing requirements or election needs. Estates of nonresident noncitizens generally use Form 706-NA and follow a different framework that is not interchangeable with
Form 706.
A filing may be required if the federal estate tax exemption is exceeded or if an election is needed, such as to preserve the Deceased Spousal Unused Exclusion. Both taxable and elective filings must meet the same documentation and accuracy standards.
Transfer Tax Context and Year-Specific Rules
For deaths in 2021, the exemption level and tax rate are governed by the federal estate tax rules in effect after the Tax Cuts and Jobs Act. The estate tax return measures tax due after accounting for deductions, credits, and prior gift tax history.
Recent developments affecting estate planning do not change the core structure of Form 706.
The return relies on fair market value at death and integrates gift tax history, GST exemption considerations, and wealth transfer mechanics.
Ten-Step Checklist for Completing Form 706 (2021)
Step 1: Confirm the correct return and filing purpose
Confirm the decedent’s citizenship and residency to determine whether Form 706 or Form
706-NA applies. Identify whether filing is required due to the exemption amount being exceeded or is elective to preserve portability for a deceased spouse.
This determination governs the entire filing process. Using the wrong return can invalidate elections and delay IRS processing.
Step 2: Confirm date of death and applicable tax year
Verify that the date of death falls within calendar year 2021. Use the Instructions for Form 706 that apply specifically to 2021 estates.
Form 706 is an estate and generation-skipping transfer tax return, not an income tax return. Do not apply income tax concepts to the estate tax computation.
Step 3: Determine whether filing is required under the 2021 thresholds
Calculate the gross estate and add adjusted taxable gifts reported on prior Form 709 filings.
Compare the total to the federal estate tax exemption for 2021.
If filing is not otherwise required, confirm whether an election still necessitates filing. Portability elections require timely filing even when there is no tax liability.
Step 4: Gather identification and executor authority documents
Collect the death certificate and verify the decedent’s identifying information, marital status, and domicile. Confirm executor authority through court documents or governing instruments.
If representation before the Internal Revenue Service is needed, prepare the appropriate authorization. Authority to act must be documented separately from the return itself.
Step 5: Build a complete inventory of includible property
Identify all property transferred at death, including real estate, financial accounts, business interests, trust arrangements, and tangible personal property. Include nonprobate assets and retained interests that affect the gross estate.
Life insurance proceeds may be includible depending on ownership and incidents of ownership.
Each asset must be supported with documentation reflecting its status at death.
Step 6: Value assets and document fair market value
Report each asset at fair market value as of the date of death unless an election applies.
Maintain appraisal reports, pricing statements, and valuation analyses as support.
Alternate valuation may be used only if properly elected on the form. Valuation workpapers should clearly explain assumptions and methodology.
Step 7: Complete asset schedules accurately
Report assets on the correct schedules, including Schedule D for life insurance policy interests,
Schedule E for jointly owned property, Schedule F for miscellaneous assets, and Schedule G for certain lifetime transfers.
For each life insurance policy reported, attach Form 712 Life Insurance Statement as required.
Schedule totals must reconcile to the gross estate without duplication.
Step 8: Apply marital deduction and QTIP rules
If property passes to a surviving spouse, determine eligibility for the unlimited marital deduction—report qualifying property on the marriage deduction schedule in accordance with the instructions.
QTIP trusts require proper reporting on Schedule M to effect the election. The election is made through reporting, not through a separate attachment or schedule.
Step 9: Report GST tax items at death when applicable
Identify whether a generation-skipping transfer occurs at death under section 2612, such as a direct skip to a skip person or dynasty trusts. Use Schedule R-1 and related sections only when
GST tax applies.
GST exemption allocations must align with Chapter 13 rules. Do not confuse Form 706 with separate Form 706GS returns used for trust distributions or terminations.
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Step 10: Execute, assemble, and file the return
Review the completed Form 706 and schedules for internal consistency and accuracy. Ensure the executor signs under penalties of perjury and that confidential information is complete.
File the return by the due date, generally nine months after death, or request an extension if needed. Payment of any tax owing may be made through the Electronic Federal Tax Payment
System.
Deductions, Transfers, and Special Considerations
Estate deductions reduce tax liability only when properly documented and allowable. Medical expenses, administration costs, and debts must relate to the decedent or estate and be reported on the correct schedules.
Transfers of property at death, including life estate interests and trust distributions, should be reviewed carefully. Proper classification supports accurate estate tax and GST tax reporting.
Planning, Compliance, and Professional Review
Form 706 filings often involve complex estate planning structures such as retained annuity trusts, Crummey trust arrangements, and asset protection provisions. Errors can affect wealth transfer outcomes and future trust administration.
Consultation with a tax professional or estate attorney is appropriate when handling high-value estates, GST exemption issues, or intricate trust structures. Careful preparation supports compliance and reduces the risk of amended filings or disputes 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.
