How to Complete Lines 8–16 of Part 4: Estate Form 706
5 of 8 in Series: The Essentials of Completing the Estate Tax Return (Form 706)
In Part 4 of Form 706, lines 8–16 are designed to remind you of other property that may be includible in the decedent’s estate and, consequently, is taxable. Be aware that if you aren’t including this property, the IRS will want an explanation.
Line 8: If any insurance on the decedent’s life isn’t included on the return (because the insurance wasn’t owned by the decedent), answer yes on line 8a. Also complete Schedule D. Attach as an exhibit Form 712, Life Insurance Statement and an explanation of why the policy isn’t includible in the estate.
On line 8b, follow the same process for any policy that the decedent owned on the life of another that isn’t being included in the estate.
Line 9: If the decedent held property as a joint tenant with right of survivorship, one of the joint tenants was not the surviving spouse, and you’re including less than the full value of the property on the return, answer yes on line 9. Also report it on Schedule E.
Line 10: Line 10a asks whether the decedent owned an interest in a partnership or unincorporated business or stock in an inactive or closely held corporation. On line 10b, disclose whether you discounted the value of any of these interests for any reason. If you did, consult Schedule F. You’re entitled to take a market discount, but be prepared for an audit.
Line 11: Complete and attach Schedule G if the decedent made any transfers during life under Sections 2035 (adjustments for certain gifts made within three years of death), 2036 (transfers with a retained life estate), 2037 (transfers taking effect at death), and 2038 (revocable transfers). Consult your tax advisor.
Line 12: On line 12a, answer yes if any decedent-created trusts existed at the decedent’s death. Attach a copy of the trust as an exhibit. For line 12b, answer yes if the decedent possessed any powers, beneficial interest (interest whereby the decedent benefitted form the trust), or trusteeship (decedent was a trustee of a trust) under any trusts created by someone else.
Line 12c asks whether a GST taxable termination occurred on the death of the decedent. If so, obtain a copy of the trust and attach it as an exhibit along with the name, address, TIN, and phone number of the trustees of that trust.
If the decedent transferred or sold an interest in a partnership, limited liability company, or closely held corporation to a trust described in lines 12a or 12b, provide the Employer Identification Number (EIN) of that entity on line 12e. Check with your tax advisor.
Line 13: If the decedent possessed a general power of appointment, complete Schedule H. A general power of appointment is a power to appoint the assets of a trust in favor of anyone, including the holder of the power. Many people use it in marital trusts for the surviving spouse because it qualifies the trust for the marital deduction.
.Line 14: If the decedent owned, or had any interest in, a foreign bank or brokerage account, answer this question yes. The IRS is not asking about foreign stock ownership here.
Line 15: If the decedent was receiving either an annuity (income paid in a series of payments) as described in the instructions from Schedule I or a private annuity, complete and attach Schedule I.
Line 16: If the decedent was ever the beneficiary of a trust created by a predeceased spouse for whom the marital deduction was claimed, and the trust isn’t reported on this 706, answer yes here and attach an explanation as an exhibit.