How to Complete Lines 9–17 of Part 4: Estate Form 706
Lines 9–17 of the Estate Form 706 are to remind you of other property that may be includible in the decedent’s estate. If you aren’t including it, the IRS wants an explanation.
Line 9: If any insurance on the decedent’s life isn’t included on the return, answer yes on line 9a, complete Schedule D, and attach as an exhibit Form 712, Life Insurance Statement, together with an explanation of why the policy isn’t includible in the estate. On line 9b, follow the line 9a process for any policy that the decedent owned on the life of another but isn’t being included.
Line 10: If the decedent held property as a joint tenant with right of survivorship, one of the joint tenants was someone other than the surviving spouse, and you’re including less than the full value of the property on the return, tick yes on line 10 and report it on Schedule E.
Line 11: Line 11a asks whether the decedent owned an interest in a partnership or unincorporated business or stock in an inactive or closely held corporation. On line 11b, you need to disclose whether you discounted the value of any of these interests for any reason. If you did take market discounts, check out the instructions for Schedule F.
Although you’re certainly entitled to take a market discount, have all your backup information organized and your ducks in a row, and be prepared for an audit. The IRS loves to audit these discounted valuations of closely held corporations.
Line 12: Complete Schedule G if the decedent made any transfers during life under IRC 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).
This line is a good place to check with your tax advisor.
Line 13: On line 13a, answer yes if any decedent-created trusts existed at the decedent’s death. Attach a copy of the trust as an exhibit. For line 13b, answer yes if the decedent possessed any power, beneficial interest (interest whereby the decedent derived any benefit from the trust), or trusteeship (decedent was a trustee of a trust) under any trusts not created by him or her.
Line 13c is trying to determine whether a GST taxable termination occurred on the death of the decedent. If so (and you can find out by asking the current trustees of any such trust), 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.
Here’s another good place to check with your tax advisor. On line 13e, if the decedent transferred or sold an interest in a partnership, limited liability company, or closely held corporation to a trust described in lines 13a or 13b at any time during his or her lifetime, provide the Employer Identification Number (EIN) of that entity here.
Line 14: If the decedent possessed, exercised, or released 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. Look for it if your decedent is a surviving spouse; many folks use it in marital trusts for the surviving spouse.
Be careful not to confuse a general power of appointment with a limited power of appointment, where you may only appoint in favor of certain specified people or entities, usually limited to your children, grandchildren, other lineal heirs, and charitable organizations.
Line 15: If the decedent owned, or had any interest in, a foreign bank or brokerage account, answer yes to this question.
Don’t be confused by foreign stock ownership — those shares of European and/or Asian companies routinely showing up in stock portfolios aren’t what the IRS is asking about here.
Line 16: If the decedent was receiving either an annuity described in the instructions for Schedule I or a private annuity, complete and attach Schedule I. An annuity is income paid in a series of payments.
Line 17: If the decedent was ever the beneficiary of a trust created by a predeceased spouse for which the marital deduction was claimed and the trust isn’t reported on this 706, answer yes here and attach an explanation as an exhibit. (For instance, the funds in the trust may have all been spent for the spouse’s benefit.)