Form 706 Tax Year 2012 Checklist
Unique Characteristics for 2012
Form 706 (Rev. August 2012) introduces mandatory portability election mechanics via new Part 6; executors must affirmatively opt out of the DSUE transfer or automatically elect it by filing promptly. Two new schedules (PC for protective refund claims and a redesigned portability section) reflect the legislative permanence of the 2010 estate tax framework for this year. The maximum estate tax rate remains 35 percent—the lowest in 70 years—applied to taxable estates exceeding the $5,120,000 exclusion threshold.
For 2012, the basic exclusion amount increased from $5,000,000 in 2011 to $5,120,000, reflecting inflation adjustments. The portability provisions, originally enacted under the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, became permanent for 2012 and subsequent years, creating new compliance obligations for executors of estates with surviving spouses.
Year-Specific Programs Applying to 2012 Form 706
No Economic Stimulus Payment (EIP), American Rescue Plan Act (ARPA), Tax Cuts and Jobs Act (TCJA), or Affordable Care Act (ACA) provisions apply to Form 706 in 2012. Portability of Deceased Spousal Unused Exclusion (DSUE), enacted under the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (P.L. 111-312), is now permanent for 2012 and thereafter; election made on Part 6 by filing a timely Form 706.
For estates of decedents dying in 2012, the generation-skipping transfer (GST) tax exemption also equals $5,120,000, matching the estate tax basic exclusion amount. The state death tax deduction remains available under Section 2058 for estates of decedents who die after December 31, 2004, replacing the prior state death tax credit.
Ten-Step Checklist for 2012 Form 706 Filing
1. Determine Filing Requirement
Add the decedent’s adjusted taxable gifts (post-December 31, 1976), specific exemption (pre-January 1, 1977), and gross estate valued at the date of death. File if total exceeds $5,120,000 (2012 basic exclusion amount) OR if executor elects to transfer DSUE amount to surviving spouse, regardless of estate size.
For 2012, executors of estates with surviving spouses may file Form 706 solely to make the portability election, even if the gross estate plus adjusted taxable gifts falls below the $5,120,000 threshold. Filing solely for portability purposes permits simplified reporting under special valuation rules for marital and charitable deduction property.
2. Gather and Organize Core Estate Documents
Collect the death certificate (must attach), a certified copy of the decedent’s will if testate, federal gift tax returns (Form 709, all years) showing post-1976 taxable gifts, a schedule of adjusted taxable gifts, and documentation of specific exemption claimed pre-1977 if applicable. Obtain Form 712 (Life Insurance Statement) from each insurance company for policies on the decedent’s life and policies owned by the decedent on another’s life.
For 2012, also gather documentation of any DSUE amount received from the predeceased spouse(s) if the surviving spouse claims portability from prior marriages. Collect all asset valuations, appraisals, brokerage statements, real estate assessments, business valuations, and trust documents to support Schedule A through Schedule I reporting.
3. Value All Gross Estate Assets on Schedule Date
Value real property, stocks, bonds, mortgages, cash, insurance proceeds, jointly held assets, powers of appointment, annuities, and other property as of the date of death (or alternate valuation date if elected on Part 3, line 1). For property subject to marital or charitable deduction under the special rule of Reg. section 20.2010-2T(a)(7)(ii), estimate fair market value and include in gross estate total even if specific value is not reported on schedules.
An alternate valuation date may be elected only if it decreases both the value of the gross estate and the estate tax liability. For 2012, ensure that all valuations comply with the fair market value standards under Section 2031 and applicable regulations.
4. Complete Schedules A Through I Supporting Gross Estate
Report real estate on Schedule A; stocks and bonds on Schedule B; mortgages, notes, and cash on Schedule C; insurance on decedent’s life on Schedule D (attach Form 712); jointly owned property on Schedule E; other miscellaneous property on Schedule F; transfers during lifetime under sections 2035, 2036, 2037, or 2038 on Schedule G; powers of appointment on Schedule H; annuities on Schedule I. Total each schedule and enter on Part 5—Recapitulation, items 1 through 9.
For 2012, if filing solely to elect portability and the estate is below $5,120,000 exclusion, the executor may estimate the value of marital and charitable deduction property and include the estimated total in the gross estate without reporting specific valuations, provided all other property is valued and documented with supporting documentation.
5. Report Allowable Deductions on Supporting Schedules
Claim funeral and administration expenses on Schedule J; debts, mortgages, and liens on Schedule K; loss from casualties or theft during administration on Schedule L; bequests to surviving spouses under Section 2056 on Schedule M; and charitable gifts under Section 2055 on Schedule O. Complete Schedule U if you claim a qualified conservation easement exclusion under Section 2031(c).
Enter deduction totals on Part 5, items 14 through 23, and recapitulate on Part 5, item 24. For 2012, ensure that all deductions are adequately substantiated with supporting documentation. If assets transfer to a qualified domestic trust (QDOT) for a noncitizen surviving spouse, complete Schedule M and note that the DSUE amount is preliminary and shall be redetermined at final distribution.
6. Make or Decline Portability Election in Part 6
For decedents with a surviving spouse: Complete Part 6 to elect portability of the DSUE amount, or select the “Denial of Portability” box in Section A to opt out. If assets are transferred to a qualified domestic trust (QDOT), note in Section B that the DSUE amount is preliminary and shall be redetermined at final distribution. Calculate DSUE amount portable on Section C; claim any DSUE received from predeceased spouse(s) on Section D.
Filing a timely Form 706 without opting out constitutes an automatic portability election. For 2012, the portability election is done by filing Form 706 promptly. Supplemental returns may be filed after the initial filing by entering “Supplemental Information” across the top of page 1 and attaching a copy of pages 1, 2, and 3 of the original Form 706 filed.
7. Compute Tax Liability on Part 2—Tax Computation
Enter total gross estate less exclusion (Part 5, item 13) on line 1. Enter tentative deductions (Part 5, item 24) on line 2. Compute taxable estate and state death tax deduction on lines 3a–3c. Add adjusted taxable gifts (line 4) to the taxable estate. Apply a 35 percent tax rate via Table A—Unified Rate Schedule to the tentative tax base (line 5). Subtract gift tax paid or payable (line 7, using date-of-death rates).
On lines 9a–9c, enter the basic exclusion amount ($5,120,000), any DSUE from a predeceased spouse, and the applicable exclusion total. Compute appropriate credit amount on line 9d (tentative tax on applicable exclusion from Table A). Subtract credits (lines 11, 13–15) from gross estate tax to reach net estate tax due or overpayment.
8. Report Generation—Skipping Transfer Tax if Applicable
Complete Schedule R (GST Exemption Reconciliation and allocation) for any direct skips or taxable terminations. Allocate the GST exemption and compute the GST tax. If the estate has direct skips for individuals from trusts, the executor completes Schedule R and Schedule R-1 (payment voucher). The executor files one copy of Schedule R-1 with Form 706 and provides one to the fiduciary. Fiduciary signs and files Schedule R-1 with the GST tax payment by the due date (9 months after the decedent’s death or extended date). For 2012, the GST exemption equals $5,120,000, matching the basic exclusion amount.
9. Assemble, Sign, Date, and Attach All Required Documents
Include Form 706 pages 1–4 with all required schedules in proper order. Attach the death certificate. If the estate is testate, attach a certified copy of the will. Attach Form 712 for each life insurance policy. If claiming a protective claim for refund for unresolved debts or expenses, complete two copies of Schedule PC for each unresolved claim and attach both. If claiming a foreign death tax credit, attach Schedule P and Form 706-CE. If claiming credit for prior transfers, attach Schedule Q. If electing special-use valuation (Part 3, line 2), complete and attach Schedule A-1 with the required agreement executed by all qualified heirs and interested parties. Sign and date under penalty of perjury as executor; if multiple executors, all are responsible, but only one is required to sign.
10. File Within Nine Months of Decedent’s Death
File a complete Form 706, including all required schedules, attachments, and the death certificate, within nine months of the decedent’s date of death. If unable to file by the due date, file Form 4768 (Application for Extension of Time to File) for an automatic six-month extension. To elect portability for 2012, file Form 706 promptly.
Supplemental returns may be filed after the initial filing by entering “Supplemental Information” across the top of page 1 and attaching a copy of pages 1, 2, and 3 of the original Form 706 filed. If filing solely to elect portability and the estate is below the $5,120,000 exclusion, the executor may estimate the value of marital and charitable deduction property and include the estimated total in the gross estate without reporting specific valuations.
Significant Line and Section Changes for 2012 Form 706
Part 2, Lines 9a through 9d (Applicable Exclusion and Credit): Prior year instruction (2011) had line 9 as a single line for the applicable exclusion amount and unified credit, without explicit accommodation for DSUE from a predeceased spouse or separate calculation of components. For 2012, line 9 was replaced with four lines: 9a enters the basic exclusion amount ($5,120,000 for 2012); 9b enters the DSUE amount received from any predeceased spouse; 9c adds 9a and 9b to compute the applicable exclusion; and 9d computes the appropriate credit amount (tentative tax on the amount on line 9c from Table A). Changes reflect the permanent portability election mechanics and the requirement to identify and separately factor DSUE into credit calculations.
Part 6—Portability of Deceased Spousal Unused Exclusion: The prior year instruction (2011) did not include a Part 6, and the portability election was not formalized on Form 706. For 2012, a new Part 6 was added, comprising four sections. Section A provides the option to opt out of portability by checking the corresponding box. Section B flags if assets are transferred to QDOT, triggering a redetermination of DSUE at a later distribution.
Section C requires the calculation of the DSUE amount that is portable to the surviving spouse. Section D reports any DSUE received from the last predeceased spouse and prior marriages. The executor must complete Part 6 to make or decline a portability election. Filing a timely and complete Form 706 constitutes an automatic election to transfer DSUE, unless the Section A opt-out box is checked.
Form-Specific Limitations for 2012
Form 706 applies only to estates of U.S. citizens or residents at the date of death. Nonresident aliens, not citizens of the United States, use Form 706-NA. The DSUE portability election may be made only by the executor filing a timely Form 706 (within nine months of death or within the extended period if Form 4768 is filed). Under Reg. section 20.2010-2T(a)(7)(ii), if Form 706 is filed solely to elect portability and the estate is not otherwise required to file for estate tax purposes, the executor is NOT required to report specific values for assets qualifying for marital deduction (section 2056, 2056A) or charitable deduction (section 2055).
However, the fair market value of those assets must still be estimated and included in the total gross estate. If the estate has direct skips to skip persons from trusts, the executor completes Schedule R and Schedule R-1, files one copy with Form 706, and provides a copy to the fiduciary, who signs and files the GST tax payment by the due date.
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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.
