IRS Form 706 for 2013: A Comprehensive Filing Checklist
Overview of Form 706 for 2013
The 2013 IRS Form 706 serves as the United States Estate and Generation-Skipping Transfer Tax Return for estates of decedents who died during calendar year 2013. This form is required for estates exceeding the applicable exclusion amount, which was set at $5,250,000 for 2013. The American Taxpayer Relief Act of 2012 made significant changes to estate tax law, including the permanent establishment of portability provisions that allow surviving spouses to use their deceased spouse’s unused exclusion amount.
The 2013 revision reflects these legislative updates and includes enhanced instructions for portability elections, generation-skipping transfer tax calculations, and detailed schedules for reporting various types of property and deductions. Executors must carefully complete all applicable sections to ensure compliance with federal estate tax requirements and to preserve valuable tax benefits for surviving family members.
Filing Requirements and Deadlines
Form 706 must be filed for estates of U.S. citizens or residents whose gross estate, plus adjusted taxable gifts and specific exemptions, exceeds the $5,250,000 filing threshold for 2013. The return is generally due nine months after the date of the decedent’s death. However, executors may request an automatic six-month extension by filing Form 4768 before the original due date.
Even if an estate falls below the filing threshold, executors should consider filing Form 706 to elect portability of the deceased spousal unused exclusion amount to a surviving spouse. This election allows the surviving spouse to apply the decedent’s unused exclusion amount to future transfers, potentially shielding millions of dollars from estate and gift taxes.
Checklist for Completing Form 706
1. Assemble Complete Estate Documentation
Gather all documents related to the decedent’s assets and liabilities, including deeds, bank statements, brokerage account statements, insurance policies, business ownership documents, and appraisals. Collect documentation for real estate, stocks and bonds, mortgages and notes, life insurance proceeds, jointly owned property, transfers during life, powers of appointment, and annuities. Comprehensive documentation ensures accurate valuation and proper reporting on the appropriate schedules.
2. Complete All Required Schedules
Attach all necessary schedules based on the types of assets in the estate. Schedule A reports real estate, Schedule B covers stocks and bonds, Schedule C lists mortgages and notes receivable, Schedule D includes life insurance proceeds, Schedule E addresses jointly owned property, Schedule F reports miscellaneous property, Schedule G covers transfers during life, Schedule H lists powers of appointment, and Schedule I addresses annuities. Each schedule requires detailed descriptions and accurate valuations as of the date of death or the alternate valuation date if elected.
3. Calculate Values on the Recapitulation Page
Complete Part 5—Recapitulation to summarize the total gross estate by adding the values from all applicable schedules. Then subtract allowable deductions from Schedules J, K, L, M, and O to arrive at the taxable estate. Ensure all amounts are transferred adequately from individual schedules and that calculations are accurate. The recapitulation offers an in-depth explanation of the estate’s composition and the basis for computing the estate tax liability.
4. Report Charitable Transfers Accurately
Use Schedule O to report charitable, public, and similar gifts and bequests that qualify for the estate tax charitable deduction. Provide the name and address of each charitable beneficiary, the amount of each bequest, and sufficient detail to demonstrate that the transfer qualifies for the deduction. Properly documented charitable bequests can significantly reduce the taxable estate, but incomplete information may result in the disallowance of the deduction.
5. Execute Proper Signatures and Declarations
The executor must sign and date the return under penalty of perjury, affirming that the information provided is accurate, correct, and complete. If multiple executors are appointed, all must sign unless one is authorized to act on behalf of the others. The paid preparer, if applicable, must also sign the return and provide their identifying information. Proper execution is essential for the return to be considered valid and complete.
6. Verify Property Valuations with Supporting Documentation
Ensure that all property values listed on the schedules reflect fair market value as of the date of death or the alternate valuation date if that election is made. For real estate reported on Schedule A, attach detailed legal descriptions and professional appraisals. For closely held business interests, provide business valuation reports. For items of tangible personal property reported on Schedule F with individual values exceeding $3,000, attach appraisals from qualified appraisers. Accurate valuations supported by credible documentation reduce the risk of IRS challenges.
7. Make Appropriate Elections in Part 3
Review the elections available in Part 3—Elections by the Executor and determine which are beneficial for the estate. These may include the alternate valuation election under section 2032, the special use valuation election under section 2032A for qualified real property, the election to pay estate tax in installments under section 6166 for estates with substantial business interests, and the portability election to transfer the deceased spouse's unused exclusion amount to a surviving spouse. The validity of each election depends on the satisfaction of specific requirements and deadlines.
8. Calculate Generation-Skipping Transfer Tax
Complete Schedule R to calculate any generation-skipping transfer tax owed by the estate on direct skips to skip persons. A direct skip occurs when property passes from the decedent to a person two or more generations below the decedent, such as a grandchild. Calculate the GST tax by applying the maximum estate tax rate to the taxable amount after considering the GST exemption available for 2013. Schedule R-1 may also be required if the estate includes trusts that are subject to the generation-skipping transfer tax.
9. Compute Credits and Prior Transfers
Calculate all applicable credits that reduce the estate tax liability. The unified credit based on the $5,250,000 basic exclusion amount is the primary credit available to most estates. Additionally, compute credits for state death taxes paid under Schedule P, foreign death taxes paid under Schedule P, and prior transfer credits under Schedule Q if property was inherited from someone who died within ten years before or two years after the current decedent. Properly claiming all available credits minimizes the estate’s tax burden.
10. File Using Correct Procedures
Review the completed return for accuracy and completeness, ensuring all required schedules and supporting documents are attached. Make a complete copy of the return and all attachments for the executor’s records before mailing. File the return with the appropriate IRS office as specified in the instructions for the 2013 revision.
Include payment for any estate tax due, or provide evidence of an approved extension for payment if applicable. Timely and proper filing prevents penalties and interest charges.
Key 2013 Form Updates and Special Considerations
Portability Provisions
The 2013 Form 706 includes Part 6—Portability of Deceased Spousal Unused Exclusion, which allows the estate to elect portability of any unused exclusion amount to the surviving spouse. This election is automatic upon timely filing of a complete and properly prepared Form 706, even if the estate is not otherwise required to file.
The surviving spouse can then use this deceased spouse's unused exclusion amount for future gifts or at death, potentially doubling the amount that can pass free of transfer taxes. Executors should carefully consider filing Form 706 solely to preserve this valuable benefit for surviving spouses.
Special Use Valuation Requirements
Estates electing a special use valuation under section 2032A for qualified real property must complete Schedule A-1 and attach all required documentation. This includes agreements signed by all qualified heirs accepting personal liability for potential recapture tax, detailed descriptions of the property and its qualified use, evidence of material participation by the decedent or family members for at least five of the eight years preceding death, and calculations demonstrating that the property meets the percentage requirements. Special use valuation can substantially reduce estate tax by valuing qualifying farm or business real property based on its actual use rather than its highest and best use.
Debt and Expense Deductions
Schedule K reports the debts of the decedent, including mortgages, notes payable, unpaid taxes, and other obligations existing at death. Deductions are allowed only for debts representing personal obligations of the decedent based on adequate and complete consideration.
Schedule J reports funeral expenses and expenses incurred in administering the estate, such as executor commissions, attorney fees, accountant fees, court costs, and appraisal fees. These deductions reduce the taxable estate but must be appropriately documented and cannot be claimed if they have been or will be claimed as income tax deductions on the estate’s Form 1041.
Generation-Skipping Transfer Tax Considerations
Schedule R calculates the generation-skipping transfer tax on direct skip transfers included in the gross estate. The GST exemption for 2013 equals the basic exclusion amount of $5,250,000. Executors may allocate this exemption to shield qualifying transfers from GST tax or may allow automatic allocation under the default rules. Careful planning and proper allocation of the GST exemption can preserve significant wealth for younger generations while minimizing transfer tax liability across multiple generations.
This detailed checklist helps executors and tax professionals follow a straightforward process for completing Form 706 for 2013 estates, ensuring they comply with the law and maximize tax benefits for heirs and beneficiaries.
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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.
