What Assets Are Included On Form 706?

form 706

Form 706, officially known as the United States Estate (and Generation-Skipping Transfer) Tax Return, is a document that the Internal Revenue Service (IRS) requires to be filled out by the executors of estates that exceed certain value thresholds.

It provides a comprehensive account of the decedent’s assets and deceased spousal unused exclusion, including real estate tax exemption, stocks, bonds, businesses, United States treasury, federal tax, and other tangible and intangible properties. The purpose of Form 706 is to determine the amount of estate tax exemption limit, if any, ensuring that all valuable assets are accounted for and the appropriate federal taxes are paid.

This not only helps in the fair distribution of the decedent’s wealth among the beneficiaries but also prevents potential legal complications and penalties that may arise due to underpayment or evasion of taxes. The form serves as an essential tool for the IRS to avoid tax evasion and monitor the transfer of wealth, contributing to the overall health of the national economy.

Pace & Associates CPAs, LLC, a certified public accounting firm, explains that Form 706 requires a detailed list of assets and their value to be included. This article will delve into the assets that should be included in Form 706 and their valuation methods.

Form 706 | A Basic Understanding

Form 706, often referred to as the United States Estate (and Generation-Skipping Transfer) Tax Return, is a crucial document utilized by the Internal Revenue Service (IRS) for tax-related matters associated with estates.

Executors of estates exceeding certain financial thresholds are required to complete this form. It involves an in-depth declaration of the decedent’s assets and surviving spouse, including but not limited to real estate tax return, stocks and bonds, business interests, and other tangible and intangible properties.

The primary objective of Form 706 is to establish the estate tax liability, ensuring that all significant assets are thoroughly documented and the appropriate estate taxes paid. Furthermore, this form aids the IRS in safeguarding against federal gift tax evasion and overseeing wealth transfer, thereby contributing to the stability of the national economy.

Form 706 | Importance

From a legal standpoint, accurate and thorough asset inclusion in Form 706 is imperative to prevent potential complications for the executor and beneficiaries. Failure to properly include all assets can lead to inaccurate tax calculations, underpaid taxes, or annual gift tax exclusion penalties.

It can also lead to disputes among beneficiaries regarding the distribution of assets if they are not accurately disclosed on the form.

Legal Compliance

Living trust and estate planning form on a desk. Living trust and estate planning form on a desk. Estate tax laws and regulations stock pictures, private delivery service, decedent's death certificate number,royalty-free photos & images

Form 706 is pivotal in ensuring legal compliance with estate tax laws and regulations. Executors are legally obligated to report all assets of a decedent’s estate that exceed the exemption amount. Filing Form 706 allows for the correct calculation and payment of estate taxes.

Failure to file or inaccuracies in reporting could result in substantial penalties and interest charges imposed by the IRS. Hence, proper completion and submission of Form 706 upholds the rule of law and alleviates the risk of legal complications.

Ensuring Fair Wealth Distribution

A significant function of Form 706 lies in facilitating fair wealth distribution. It provides a comprehensive list of the decedent’s assets and their respective values, offering beneficiaries a transparent overview of the estate’s composition.

This transparency encourages fairness in estate division, reducing potential conflicts among beneficiaries. Form 706 thereby plays an integral role in maintaining harmony within the family during grief.

Preventing Tax Evasion

The IRS utilizes Form 706 to prevent and detect tax evasion. The comprehensive accounting of assets required by Form 706 leaves little room for the concealment of assets or undervaluation.

Failure to report accurately, intentionally, or due to oversight can lead to significant penalties. This deterrent effect contributes to ethics in financial transactions and promotes a culture of tax reform act.

Economic Impact Of Form 706

Form 706 also plays a crucial role in supporting the health and stability of the national economy. The estate tax and taxable gifts, calculated based on the information in Form 706, contribute to the federal estate tax exemption.

This revenue supports various public services and infrastructures and private delivery services, benefiting society. Moreover, carefully monitoring wealth transfer through Form 706 can help identify trends in wealth concentration, providing valuable data for economic planning and policy-making.

Facilitating Financial Planning

Finally, the necessity of preparing Form 706 prompts comprehensive financial planning. To complete the form accurately, estate executors are encouraged to seek professional advice and thoroughly examine the decedent’s assets. This process can provide valuable insights into estate planning, leading to better financial decisions and more efficient wealth management.

The importance of Form 706 extends beyond its immediate function as a tax document. It serves as a tool for legal compliance, fair wealth distribution, and prevention of tax evasion; adjusted taxable gifts and estate taxes apply to it and support economic stability. Furthermore, it encourages comprehensive financial planning, contributing to better financial management and understanding.

Form 706 | Types Of Assets Included

Several categories of assets must be included on Form 706, which is the United States Estate (and Generation-Skipping Transfer) Tax Return. These assets include but are not limited to real estate properties, bank accounts, investment portfolios, business interests, vehicles, and personal belongings such as jewelry and artwork.

Ensuring the accurate and comprehensive reporting of these assets is crucial for estate tax purposes and compliance with the Internal Revenue Service (IRS) regulations.

Real Estate

Real estate forms a significant part of many estates and must be included when filing Form 706. The real estate in question extends beyond the decedent’s primary residence and may consist of other residential properties, commercial properties, agricultural land, and undeveloped land.

Each property should be carefully appraised to determine its fair market value at death. This appraisal will frequently require the services of a professional real estate appraiser.

Stocks And Bonds

The decedent holds stocks, bonds, and other securities, which are assets that must be reported on Form 706. These financial instruments can range from shares in publicly traded companies to government bonds and other debt securities. The value of such securities is typically determined based on market prices on the date of the decedent’s death.

Business Interests

If the decedent owned a business or a part of a business, this must also be reported. Business interests can be complex to value and may require a professional appraisal, especially for privately held companies.

Factors such as the company’s financial performance, growth prospects, market position, and the value of its tangible and intangible assets are often considered in the valuation process.

Cash And Bank Accounts

All cash on hand and balances in bank accounts must be reported. This includes checking and savings accounts, certificates of deposit, and money market accounts. The value of these assets is generally straightforward to determine based on the balance in the account on the day of the decedent’s death.

Personal Property

decedent's gross estate valued Residential real estate loan, financial concept: House model, coins, US dollar bag, white clock on a table, depicts home loan or borrowing money to buy/purchase a new home for first time homebuyer Residential real estate loan, financial concept: House model, coins, US dollar bag, white clock on a table, depicts home loan or borrowing money to buy/purchase a new home for first time homebuyer Personal Property stock pictures, royalty-free photos & images.

Personal property, including vehicles, furniture, artwork, jewelry, and other valuable items, must also be included on Form 706. Valuing these items often requires an appraisal, especially for unique or high-value items like antiques or art pieces.

Retirement Accounts

Retirement accounts, such as 401(k)s, IRAs, and pension plans, are another type of asset that must be reported on Form 706. The value of these accounts is typically the account’s balance on the day of the decedent’s death. However, the tax treatment of these assets can be complex, depending on the type of account and the decedent’s age at the time of death.

Life Insurance Proceeds

If the decedent owned life insurance policies, the proceeds of these policies may need to be included on Form 706. This typically applies when the decedent retained incidents of ownership in the policy, such as the ability to change beneficiaries or borrow against the policy’s cash value. The proceeds are usually valued at the amount received upon the decedent’s death.


Annuities are contracts that provide income for a specified period of life, and they must be included on Form 706 if the decedent was the annuitant. The valuation of annuities can be complex and may require professional guidance.

The types of assets that must be included on Form 706 are diverse, and the valuation process can be complex. Pace & Associates CPAs, LLC. Offers professional estate planning and tax services to assist with preparing Form 706 and other important tax documents.

Guide To Filling Out Form 706

Filling out Form 706 can be a daunting task, but with proper guidance and preparation, it can become more manageable. Here is a step-by-step guide to help you navigate this process successfully.

  1. Gather Necessary Information

Begin filling out Form 706 by gathering all relevant financial documents and records for the decedent’s estate. This could include deeds for real estate, bank account statements, life insurance policies, and valuation reports for personal property and business interests. Ensuring comprehensive and accurate information about all assets and liabilities is crucial.

  1. Identify The Executor Or Administrator

Identify the executor or administrator of the estate. This person will be responsible for completing and signing the form. If the decedent did not designate an executor in their will, the court will appoint an administrator.

  1. Determine The Gross Estate

Calculate the gross estate, which includes the fair market value of all assets the decedent owned at the time of death. This could include cash and bank accounts, real estate, business interests, personal property, retirement accounts, life insurance policies, and annuities. You can use professional appraisals where necessary to ensure accurate valuation.

  1. Calculate Deductible Expenses

Deductible expenses can reduce the gross estate for tax purposes. This could include administrative expenses such as legal fees and funeral costs, debts of the decedent, and charitable deductions. Be sure to have documentation for all deductions claimed.

  1. Calculate The Taxable Estate

Subtract the total deductible expenses from the gross estate to determine the taxable estate. This is the amount upon which the estate tax will be calculated.

  1. Apply Exemptions And Credits

Apply any available exemptions and credits. The most significant is the Unified Credit, which can be applied against the estate tax. Other credits may also be available, such as the credit for foreign death taxes and the credit for tax on prior transfers.

  1. Calculate The Estate Tax

Calculate the estate tax based on the taxable estate. The tax is progressive, meaning that the rate increases as the size of the taxable estate increases. The IRS provides tax rate schedules to help with this calculation.

  1. Sign And Date the Form

Once you’ve filled out all sections of the form, the executor or administrator must sign and date it. The person responsible for signing the state is also swearing under penalty of perjury that the information provided is true and accurate.

  1. Submit The Form

Submit the completed Form 706 to the IRS by the due date. This is typically nine months after the decedent’s death, though a six-month extension may be available if requested before the due date.

  1. Keep A Copy

Finally, keep a copy of the completed form and all supporting documents for your records. This will be important if the IRS has questions or if there is an audit.

Filling out Form 706 can be intricate, requiring careful attention to detail and a thorough understanding of the decedent’s assets and estate planning arrangements. Consultation with a tax professional or attorney is often beneficial to ensure accuracy and compliance.


In conclusion, the importance of Form 706 in estate planning cannot be overstated. This critical tax document provides a comprehensive record of the decedent’s total gross estate, ensuring an accurate calculation of the estate tax liability. It covers various asset types, including real estate, retirement accounts, life insurance proceeds, and annuities.

Each asset category requires careful valuation and scrutiny to ensure legal compliance and equitable wealth distribution. Given the complexity and diversity of assets, preparing Form 706 often entails detailed knowledge and professional expertise.

So, it is crucial to approach this process with diligence and attention to detail to uphold legal compliance and fair distribution of wealth. Pace & Associates CPAs, LLC. Offers experienced estate planning and tax services to guide individuals through preparing Form 706 and other important tax documents, ensuring peace of mind for their clients and their loved ones.


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