IRS Instruction 706 – IRS Forms, Instructions, Pubs 2026 – In the complex world of estate planning, IRS Form 706 plays a crucial role for executors handling the affairs of deceased individuals. Officially titled the United States Estate (and Generation-Skipping Transfer) Tax Return, this form is used to calculate and report estate taxes under Chapter 11 of the Internal Revenue Code, as well as the generation-skipping transfer (GST) tax under Chapter 13. The accompanying Instructions for Form 706 provide detailed guidance on completing the form, ensuring compliance with federal tax laws. This SEO-optimized article breaks down everything you need to know about IRS Instruction 706, including filing requirements, exemptions, rates, and recent updates for 2026. Whether you’re an executor, estate planner, or simply researching estate taxes, this guide draws from official IRS sources to help you navigate the process.
What Is IRS Form 706 and Why Is It Important?
Form 706 is filed by the executor of a decedent’s estate to determine the estate tax liability. It encompasses the valuation of the decedent’s gross estate, deductions, and any applicable GST taxes on direct skips to beneficiaries more than one generation removed. The form ensures that wealth transfers are taxed appropriately, preventing undue avoidance of taxes across generations.
The Instructions for Form 706 outline step-by-step procedures for filling out the form’s various parts and schedules. These instructions are essential for accurately reporting assets like real estate, stocks, insurance, and more, while claiming allowable deductions such as marital or charitable contributions. Failing to file correctly can result in penalties, audits, or unnecessary tax burdens, making it vital for executors to consult these guidelines or seek professional advice.
Who Must File Form 706?
Not every estate requires a Form 706 filing. The requirement hinges on the value of the gross estate plus adjusted taxable gifts:
- U.S. Citizens or Residents: File if the gross estate, combined with adjusted taxable gifts and specific exemptions, exceeds the basic exclusion amount ($15 million in 2026).
- Portability Election: Even if below the threshold, file to transfer any deceased spousal unused exclusion (DSUE) to the surviving spouse.
- Nonresident Non-Citizens: May need to file if the decedent owned U.S.-situated assets, using Form 706-NA instead.
The executor—typically named in the will or appointed by the court—is responsible for filing. If no executor is appointed, any person in possession of the estate’s property may need to step in. Estates below the threshold generally don’t file unless electing portability or dealing with specific GST issues.
Filing Deadlines and Extensions for Form 706
Timely filing is critical to avoid penalties. The standard deadline is nine months after the date of death. For example, if the decedent passed on January 1, 2026, the form is due by October 1, 2026.
- Extensions: Request a six-month extension using Form 4768 before the original due date. This extends filing but not payment—estimated taxes must be paid on time to avoid interest and penalties.
- Where to File: Mail to the Department of the Treasury, Internal Revenue Service Center (specific addresses vary; check IRS guidelines).
- Penalties: Late filing can incur a 5% monthly penalty on unpaid taxes, up to 25%, plus interest.
For GST-related forms like 706-GS(T), deadlines align with trust termination events.
Estate Tax Exemption and Rates in 2026
The estate tax applies to the taxable estate after deductions. Key figures for 2026 include:
- Basic Exclusion Amount (Exemption): $15 million per individual ($30 million for married couples), increased under the One Big Beautiful Bill Act (Public Law 119-21) from $13.99 million in 2025. This amount is indexed for inflation starting in 2027.
- Tax Rate: A flat 40% on amounts exceeding the exemption.
- Annual Gift Exclusion: Remains $19,000 per recipient ($38,000 for couples) to avoid using lifetime exemption.
| Year | Exemption Amount | Tax Rate |
|---|---|---|
| 2025 | $13.99 million | 40% |
| 2026 | $15 million | 40% |
This increase provides more room for tax-free transfers, but state estate taxes (e.g., New York’s $7.35 million exclusion) may still apply.
Understanding the Generation-Skipping Transfer Tax (GSTT)
The GSTT targets transfers skipping a generation, such as to grandchildren, to prevent tax avoidance. It’s imposed in addition to estate or gift taxes.
- When It Applies: Direct skips (e.g., gifts to grandchildren), taxable terminations, or distributions to skip persons (relatives two generations below or unrelated individuals 37.5+ years younger).
- Exemption and Rate: Mirrors the estate tax—$15 million exemption and 40% rate in 2026.
- Filing: Use Schedule R for GST tax on Form 706; separate forms like 706-GS(T) for trust terminations.
The GSTT ensures taxation as if the transfer passed through each generation, potentially leading to an effective 64% rate on taxable amounts without planning.
How to Complete Form 706: Key Schedules and Instructions
The Instructions for Form 706 detail the form’s structure, divided into parts and schedules. Here’s an overview:
- Part 1: Decedent and Executor Info: Basic details like name, SSN, and executor contact.
- Part 2: Tax Computation: Calculates tentative tax, credits, and net liability.
- Schedules:
- A: Real Estate
- B: Stocks and Bonds
- C: Mortgages, Notes, Cash
- D: Insurance
- E: Jointly Owned Property
- F: Other Miscellaneous Property
- G: Transfers During Life
- H: Powers of Appointment
- I: Annuities
- J: Funeral and Administration Expenses
- K: Debts and Liens
- L: Net Losses and Expenses
- M: Marital Deduction
- O: Charitable Deductions
- P: Credit for Foreign Death Taxes
- Q: Credit for Tax on Prior Transfers
- R: GST Tax
- U: Qualified Conservation Easement Exclusion
Valuations are typically at fair market value on the date of death, with options for alternate valuation six months later if it reduces tax. Special rules apply for farms, businesses, and conservation easements.
Recent Changes and Updates to Form 706 Instructions
The IRS regularly updates Form 706 to reflect legislative changes. For the September 2025 revision (applicable to 2026 filings):
- Exemption Increase: Boosted to $15 million under new legislation.
- Estate Tax Closing Letter (ETCL) Fee: Reduced to $56 effective May 21, 2025.
- Form Layout Changes: Expanded to 56 pages with new fields for foreign addresses and banking info for direct deposits/withdrawals.
- No Sunset on Exemption: The $15 million base is now permanent, with annual inflation adjustments.
These updates make 2026 a pivotal year for estate planning, emphasizing the need for current advice.
Tips for Compliance and Avoiding Common Pitfalls
- Gather Documentation: Collect asset valuations, wills, trusts, and prior gift tax returns (Form 709).
- Seek Professional Help: Estate taxes involve intricate rules; consult a tax attorney or CPA.
- State Considerations: Federal Form 706 doesn’t cover state taxes—check local requirements.
- Electronic Filing: Form 706 isn’t e-fileable; paper filing is required.
- Penalties for Non-Compliance: Underpayment can lead to audits; overpayment may require amended returns.
Conclusion
IRS Instruction 706 is your roadmap for navigating estate and GST taxes via Form 706. With the 2026 exemption at $15 million and a 40% rate, proactive planning can minimize liabilities and ensure smooth wealth transfers. Always refer to the latest IRS publications for personalized guidance, as tax laws evolve. For the full instructions, download from the IRS website. If you’re dealing with an estate, starting early is key to compliance and peace of mind.