Form 706 (2021) Instructions: Accurate Filing Checklist

Form 706 is the Federal Estate Tax Return used to report the federal gross estate, calculate estate tax, and address generation-skipping transfer items tied to direct skips for decedents dying in 2021. This tax return applies to U.S. citizens or U.S. residents and relies on estate and gift tax concepts, valuation rules, and the exclusion amount framework under federal estate tax law.

Ten-Step Checklist (2021)

1. Step 1: Determine whether Form 706 must be filed

   Confirm filing requirements by applying the estate tax exemption, reconciling federal adjusted taxable gifts, and comparing totals to the 2021 filing threshold for the return. Even when no tax due appears likely, a timely filing may still be needed to preserve a portability election for a deceased spouse and support long-term tax-saving strategies.

2. Step 2: Confirm the correct return type and estate classification

   Verify citizenship and domicile to confirm whether Form 706 or Form 706-NA is required, since estate tax residency is based on domicile rather than income tax classifications. This determination affects whether worldwide assets are included in the federal gross estate and helps prevent avoidable errors that can delay processing or trigger follow-up requests.

3. Step 3: Establish executor authority and responsibilities

   Identify the personal representative and document executor obligations using court appointments, governing instruments, and other records recognized by the Internal Revenue

   Code and IRS forms guidance. Authority controls signing and filing, and it also supports accurate handling of communications, requests for records, and later administrative steps tied to estate tax administration.

4. Step 4: Inventory the federal gross estate

   Compile real and tangible personal property, intangible personal property, bank accounts, and other interests included in the decedent's estate, then organize each item under the proper schedule structure. Clear organization supports the fair market value analysis, reduces audit risk, and helps avoid later confusion when preparing an amended return or responding to IRS review questions.

5. Step 5: Select the valuation method

   Use date-of-death valuation unless alternate valuation is elected under applicable federal estate tax law and supported by documentation consistent with the Form 706 instructions. Alternate valuation should be chosen only when it reduces both the federal gross estate value and the estate tax liability, and it must be applied consistently across affected property.

6. Step 6: Complete asset schedules accurately

   Report assets on the correct schedules, including Schedule A for real estate, Schedule E for survivorship-style joint interests, and other schedules that match the property classification and ownership form. Accurate schedule placement prevents distortions in the gross estate totals and supports consistent basis reporting concepts, even though income tax basis rules operate outside the estate tax return.

7. Step 7: Report deductions and credits properly

   Claim allowable deductions using the correct schedules and maintain support for administration costs, debts, and other items permitted under estate tax law and estate and gift tax principles.

   Credits and deductions should be carefully reviewed because misplacement can affect the computation of the exclusion amount, increase processing time, and delay the issuance of an estate tax closing letter.

8. Step 8: Reconcile lifetime transfers and prior gifts

   Gather gift tax history and reconcile federal adjusted taxable gifts to ensure the unified transfer tax system computation properly reflects lifetime transfers and prior reporting positions. This reconciliation supports accurate application of the exclusion amount, helps confirm whether filing requirements are met, and reduces conflicts between estate filings and prior gift tax returns.

9. Step 9: Evaluate Generation-Skipping Transfer reporting

   Determine whether the Generation-Skipping Transfer applies and whether reporting belongs on

   Schedule R or Schedule R-1, based on the specific transfer tax facts and schedule instructions.

   Correct classification avoids mixing executor and trustee roles and aligns GST reporting with the structure used for direct skips reported through the estate filing process.

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10. Step 10: Sign, assemble, and file the return

    Ensure the executor signs under penalties of perjury, assembles required attachments, and follows the mailing address instructions for the revised October 2021 version used for the filing.

    Retain proof of timely filing and complete workpapers, since recent developments, IRS processing cycles, or later documentation requests may require quick retrieval of the supporting record set.

    Form-Specific Scope Notes for 2021

    Form 706 uses the federal estate tax framework. It incorporates the mechanics of the portability election, as shaped by legislation, including the American Taxpayer Relief Act of 2012, and related IRS guidance. State-level filings, such as those administered by the Vermont

    Department of Taxes, follow separate estate tax law standards and should not be treated as substitutes for federal estate tax returns.

    Final Review Before Submission

    Confirm totals, schedule placement, and documentation support the reported federal gross estate, deductions, and transfer tax computations, including any items affecting the estate tax exemption. This final pass supports the art of the estate tax return by reducing avoidable errors, limiting audit risk, and improving the likelihood of smooth processing without unnecessary follow-up.

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