The filing of Form 706 is a structured process through which the Internal Revenue Service evaluates an estate after a decedent’s death. Once the obligation to file arises, the system moves through a fixed sequence that identifies property, determines how that property is valued, applies reductions and deductions, and produces an estate tax and generation-skipping transfer tax position that may continue to affect future filings.
The role of Form 706 within the filing sequence
Form 706 serves as the central mechanism that translates the decedent’s property and transfers into a taxable framework. The form does not calculate tax in isolation but aggregates information reported across multiple schedules, each of which represents a distinct stage in the system’s evaluation of the estate.
The official definition, statutory purpose, and formal structure of this return are described on the IRS Form 706 document page.
The circumstances that initiate this filing sequence are explained in when Form 706 is required.
Identification and classification of estate property
The process begins by identifying all property interests connected to the decedent. These interests are classified by type because different statutory rules govern their inclusion and valuation. Each category is reported on a dedicated schedule that reflects how the system treats that form of property.
- Real estate included in the estate
- Stocks, bonds, and marketable securities
- Cash, notes, and similar financial interests
- Life insurance included in the estate
- Jointly owned property
- Other property interests
- Lifetime transfers brought back into the estate
- Powers of appointment
- Annuities and similar interests
Reduction of the estate through debts and expenses
After property has been identified and valued, the system reduces the gross estate by accounting for allowable obligations. Debts of the decedent, administration expenses, and certain losses are applied at this stage to reflect the estate’s net taxable position.
The way these reductions are applied is described in estate expenses and debts under Form 706.
Application of deductions and statutory transfers
Once the net estate is determined, the system evaluates transfers that qualify for special treatment. Transfers to a surviving spouse and qualifying charitable bequests are treated separately because they may remove property from immediate taxation or alter how future tax consequences are determined.
Special exclusions, credits, and GST coordination
Some estates involve additional statutory mechanisms that modify the tax outcome beyond standard deductions. These include foreign death tax credits, credits for tax on prior transfers, conservation easement exclusions, and rules governing generation-skipping transfers. These provisions apply only in defined situations but are integrated into the Form 706 process when triggered.
Completion of the filing and continuing effects
After all property, reductions, deductions, and credits are applied, Form 706 produces a final estate tax and GST position. This outcome may result in tax due, no tax due, or preserved elections that affect future gift or estate tax filings. The filing does not always conclude the estate’s interaction with the system, as corrections or later developments may require additional action.
Situations involving corrections or later changes are addressed in amending a previously filed Form 706, while this page remains part of the broader overview available in the Form 706 overview.