Form 706 Filing Guide for Tax Year 2011
Understanding Form 706 for 2011 Decedents
Form 706, the United States Estate and Generation-Skipping Transfer Tax Return, serves as the official document for reporting federal estate tax obligations for deceased U.S. citizens and residents. The tax year 2011 marked a continuation of significant legislative changes enacted under the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, which established consistent rules for estate taxation following the unique circumstances of 2010.
The 2011 Tax Law Environment
The Tax Relief Act of 2010 established the framework governing estate taxation in 2011. This legislation set the applicable exclusion amount at $5,000,000 with a corresponding maximum unified credit of $1,730,800. The maximum estate tax rate was fixed at 35 percent for estates, generation-skipping transfers, and lifetime gifts. The generation-skipping transfer tax also carried a maximum rate of 35 percent for 2011, marking a change from the zero percent rate applicable in 2010.
A significant innovation introduced for 2011 was the portability election. This provision allowed a surviving spouse to use the unused exclusion amount of a deceased spouse who died after December 31, 2010. To enable this portability, executors were required to file a timely and complete Form 706 for the predeceased spouse’s estate, even when no estate tax was due. This portability election presented a significant estate planning opportunity for married couples, enabling them to combine their exclusion amounts.
The reunification of the gift and estate tax systems under the 2010 Act resulted in the combination of the credit for transfers made by gift and the credit for transfers made at death into a single unified credit. Prior gifts made after 1976 were required to be calculated at the rate in effect at the decedent’s date of death, necessitating careful computation using the 2011 rate schedule.
Filing Requirements and Deadlines
For 2011 decedents, Form 706 was required under two distinct circumstances. First, estates were required to file when the gross estate, plus adjusted taxable gifts and specific exemption amounts, exceeded $ 5 million. Second, even estates below this threshold were required to file if the executor wished to make the portability election to permit the decedent’s surviving spouse to use the decedent’s unused exclusion amount for estate and gift tax purposes.
The standard filing deadline was nine months after the date of the decedent’s death. Executors could request an automatic six-month extension of time to file by submitting Form 4768. Payment of estate and generation-skipping transfer taxes followed the same nine-month deadline. However, executors could request extensions for payment or elect installment payment under section 6166 for estates heavily concentrated in closely held business interests.
10-Step Filing Checklist for Form 706 Tax Year 2011
Step 1: Verify Filing Requirements and Executor Authority
Confirm that the decedent’s date of death falls within the calendar year 2011 and determine whether the estate meets the filing threshold of $5,000,000 or whether the executor intends to make the portability election. Calculate the gross estate by adding the value of all property interests at the date of death plus adjusted taxable gifts made after December 31, 1976.
Obtain documentation proving the executor’s authority, such as a certified copy of the will showing the executor’s appointment or a court order designating the executor. Prepare copies of the death certificate, as this document must be attached to the return.
Step 2: Gather Required Documentation and Supporting Materials
Collect the death certificate, which must be attached to Form 706. If the decedent died testate, obtain a certified copy of the will. Gather Form 712 (Life Insurance Statement) for every life insurance policy on the decedent’s life, regardless of beneficiary designation. Collect copies of all gift tax returns (Form 709) previously filed by the decedent to support the computation of adjusted taxable gifts.
Obtain professional appraisals for real estate, closely held business interests, and other assets requiring expert valuation. Secure trust instruments if the decedent was a grantor or beneficiary of any trusts. Collect statements for all financial accounts, brokerage accounts, retirement plans, and documentation of debts and liabilities.
Step 3: Complete Part 1 General Information
Enter the decedent’s complete identifying information on page one, including full legal name, social security number, date of birth, and date of death. Provide the legal residence address and county of domicile at the time of death, specifying the year domicile was established. List all executors with their complete names, addresses, social security numbers, and telephone contact information.
Identify the probate court where the will was admitted, or estate administration commenced, including the case number and jurisdiction. Indicate the decedent’s marital status at death and provide information about the surviving spouse if applicable, including name, social security number, and estimated property value passing to the spouse.
Step 4: Report Real Estate on Schedule A
Complete Schedule A for all real property owned by the decedent or in which the decedent held any interest at death. Provide detailed property descriptions, including street addresses for urban property or complete legal descriptions with township and range information for rural parcels. Report fair market value based on professional appraisals and attach copies of all appraisal reports. Include any rental income due or accrued at the date of death.
If property is subject to mortgages for which the estate is liable, report the full property value and separately deduct the mortgage amount on Schedule K. If electing special-use valuation under section 2032A for qualified farm or closely held business real property, complete and attach Schedule A-1 with all required supporting documentation, affidavits, and the agreement signed by all qualified heirs.
Step 5: Report Stocks, Bonds, and Securities on Schedule B
Complete Schedule B for all corporate stocks, bonds, mutual funds, government securities, and other investment securities owned by the decedent. Provide the CUSIP number for each publicly traded security to facilitate IRS verification. For publicly traded securities, determine fair market value using the mean between the highest and lowest selling prices on the valuation date.
For closely held business interests, attach detailed appraisals explaining valuation methodologies, discount rates applied, and any adjustments for lack of marketability or minority interest positions. Report the number of shares, par value, and any dividends declared but unpaid at the date of death.
Step 6: Report Cash, Notes, and Mortgages on Schedule C
Complete Schedule C for all cash holdings, mortgages, notes receivable, and similar financial assets. List all bank accounts with institution names, account numbers, and exact balances as of the date of death. Report any notes receivable owed to the decedent, including the debtor’s name, date the note was created, principal amount, interest rate, payment terms, and current fair market value.
Include any contracts for deed or seller-financed real estate transactions. Report any mortgages held by the decedent as investments, providing complete details of the underlying property and payment terms.
Step 7: Report Life Insurance and Additional Assets
Complete Schedule D for all life insurance on the decedent’s life. Attach Form 712 for every policy included in the gross estate. Report the full death benefit for policies owned by the decedent, policies payable to the estate, and policies where the decedent transferred ownership within three years of death or retained any incidents of ownership.
Complete Schedule E for jointly owned property, identifying each co-owner and reporting the includible portion based on contribution rules. Complete Schedule F for other miscellaneous property, including vehicles, personal effects, household goods, jewelry, collections, digital assets, and business interests. This schedule must be filed with every Form 706, even if no assets are reported.
Question 1 on Schedule F asks whether the decedent owned any works of art, items, or collections whose artistic or collectible value at the date of death exceeded $3,000. If yes, appraisals must be attached.
Step 8: Report Lifetime Transfers and Powers on Schedules G and H
Complete Schedule G if the decedent made any transfers during life that remain includible in the gross estate under sections 2035, 2036, 2037, or 2038. This includes retained life estates, revocable transfers, transfers with retained powers, transfers within three years of death, and gift taxes paid within three years of death.
Provide detailed descriptions of the transferred property, dates of transfer, and the specific Internal Revenue Code section under which the transfer is includible.
Complete Schedule H if the decedent ever possessed, exercised, or released any general power of appointment, including five-and-five lapsing powers under section 2041. Complete Schedule I if the decedent was receiving an annuity immediately before death.
Step 9: Calculate and Report All Allowable Deductions
Complete Schedule J for funeral expenses and expenses incurred in administering property subject to claims. Include executor commissions, attorney fees, accountant fees, court costs, and appraisal fees that are actually paid or will be paid and are allowable under applicable state law. Indicate whether amounts are estimated, agreed upon, or already paid.
Complete Schedule K for debts of the decedent existing at death, providing creditor names, dates debts were incurred, amounts owed, and verification that claims are enforceable against the estate. Separately report mortgages and liens on Schedule K.
Complete Schedule L for losses incurred during estate administration from casualties or theft and expenses for administering property not subject to claims.
Complete Schedule M for the marital deduction if property passes to the surviving spouse in a qualifying form. Identify whether interests qualify as qualified terminable interest property requiring a QTIP election.
Complete Schedule O for charitable bequests to qualified organizations under section 2055, including transfers to the United States, state, or local governments, religious organizations, scientific institutions, literary organizations, educational institutions, and organizations preventing cruelty to children or animals. Attach documentation establishing the recipient organization’s tax-exempt status.
Step 10: Compute Tax Liability and Complete Required Elections
Calculate the tentative taxable estate by subtracting total allowable deductions from the gross estate value entered on Part 5 Recapitulation. Add adjusted taxable gifts made after December 31, 1976, to determine the total tax base. Apply the unified rate schedule from Table A to compute the tentative tax, then subtract gift taxes previously paid on post-1976 gifts recalculated at 2011 rates.
Apply the maximum unified credit of $1,730,800 corresponding to the $5,000,000 exclusion amount. Reduce the unified credit by any adjustment required for specific exemptions claimed on gifts made between September 8, 1976, and January 1, 1977. Calculate and apply any allowable credits for state death taxes paid, foreign death taxes paid, or tax on prior transfers.
Complete Part 3 to make any elections available to the estate. The alternate valuation election may be made only if it decreases both the value of the gross estate and the total estate and generation-skipping transfer taxes payable. Section 6166 election permits installment payment of estate tax attributable to closely held business interests that meet specific qualification requirements.
The Section 2032A special-use valuation election allows qualified farm or business real property to be valued based on its actual use rather than its highest and best use, with a maximum reduction of $1,020,000 for 2011. Complete Schedule U if electing the qualified conservation easement exclusion for land subject to perpetual conservation restrictions, with a maximum exclusion of $500,000.
Suppose the estate has generation-skipping transfers through direct skips to skip persons such as grandchildren; complete Schedule R to compute GST tax and allocate the decedent’s GST exemption. Schedule R is not required for estates without generation-skipping transfers, but may be filed to allocate GST exemption to trusts even when no immediate GST tax is due, thereby avoiding automatic deemed allocation rules.
Important Considerations for 2011 Estates
The portability election introduced significant planning opportunities for surviving spouses. By filing a timely and complete Form 706, even estates with no tax liability could preserve the unused exclusion amount for the benefit of the surviving spouse. This election required careful consideration of whether to opt out by either attaching a statement indicating no election under section 2010(c)(5) or entering the notation across the top of page one of Form 706.
The inflation-adjusted ceiling on special-use valuation for 2011 was $1,020,000. The amount used in computing the two percent portion of estate tax payable in installments under section 6166 was $1,360,000 for 2011 estates. These indexed amounts reflected adjustments for inflation as required by the Internal Revenue Code.
The state death tax deduction remained available for estates of decedents who died in 2011. Executors could claim a deduction for estate, inheritance, legacy, or succession taxes paid to any state or the District of Columbia. This deduction replaced the credit for state death taxes that had been repealed effective January 1, 2005.
Filing Location and Final Steps
Form 706 for 2011 decedents should be mailed to the Department of the Treasury, Internal Revenue Service Center, Cincinnati, Ohio 45999. The return must include all required schedules based on the composition of the gross estate. Only schedules with reportable items need to be filed, except Schedule F, which must be filed with every return, regardless of whether any miscellaneous property exists.
The executor is required to sign the declaration on page one of Form 706, subject to penalties of perjury. When multiple executors are appointed, all are responsible for the return, although only one signature is required for the document to be valid. Paid preparers must sign in the designated area and complete the preparer information section. All pages should be stapled together in proper numerical order with required supporting documentation attached.
The new rules for estate and gift taxes, set in 2011, made estate planning more straightforward and reliable. The portability election allowed married couples to retain their federal estate tax exemptions even after both spouses pass away.
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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.
