Federal transfer tax records and questions checklist

Key takeaway

Gather prior tax returns, valuation support, trust and insurance documents, spousal consents, and GST allocation and election records, then review the applicable filing and payment deadlines.

Organize your review into the groups below. Beside each document, note who holds it and what you still need to ask your advisers.

Estate return records

Attach a death certificate to Form 706. If the decedent was a U.S. citizen or resident who left a valid will, attach a certified copy of the will. If certification is unavailable, attach an uncertified copy and explain why.
Attach appraisals used to value property reported on Form 706, trust documents where the decedent was a grantor or beneficiary, and copies of the decedent's filed Forms 709. Mark those gift returns “Exhibit to Estate Tax Return.”
Include Form 712 if life insurance policies are included on the estate return. Include Form 706-CE if claiming a foreign death tax credit.
For an estate business interest valuation, submit the complete financial and other supporting data with the return. Include expert examination reports as of or near the applicable valuation date. These records do not establish a particular valuation discount.

Ask: Who will collect each attachment, and what valuation work is still outstanding?

Gift transactions and disclosure

Review debt forgiveness, loans without interest or at below market rates, insurance benefit transfers, certain divorce property settlements, and annuity exchanges creating survivor benefits for possible gift tax treatment. These transactions are not automatically taxable. Applicable exclusions and deductions require separate review.

The IRS's general disclosure checklist treats a gift as adequately disclosed when the Form 709 or attached statement filed for the gift year includes the following:

A full and complete Form 709.
A description of the transferred property and any consideration the donor received.
The identity of each donor and donee and their relationship.
For property transferred in trust, the trust's employer identification number and a brief description of its terms. A copy of the trust instrument may replace that description.
Either a qualified appraisal or a detailed description of the method used to determine the gift's fair market value.

This is the instructions' general checklist. Ask your preparer to review the detailed regulatory requirements for your transfer.

If a gift required to be reported is not adequately disclosed, gift tax on that transfer may be assessed at any time. Adequate disclosure starts the regular assessment period, generally three years after filing. It does not prevent assessment.

Gift valuation and trust attachments

If any gift reported in any part of Schedule A includes a valuation discount, answer “Yes” to the discount question. Attach an explanation of its basis and amount. Reporting the discount does not establish its validity.
For gifts of stock in close corporations or inactive stock, attach balance sheets, especially the one nearest the gift, plus earnings or operating results and dividends for each of the five preceding years. An appraisal meeting the regulatory requirements identified in the Form 709 instructions may replace those records.
Attach Form 712 for each gifted life insurance policy. For a single premium or paid up policy whose full economic value exceeds the amount on Form 712 line 59, report the full economic value on Schedule A.
For the first gift through a trust, attach a certified or verified copy of the trust instrument to the return reporting that transfer. For subsequent transfers, a brief description of the terms or a copy of the instrument may be attached.
Attach appraisals used to determine the gift value of real estate or other property. If that information is not attached, Schedule A must fully explain how value was determined. The adequate disclosure requirements still apply.

Ask: Does the valuation file explain both the property transferred and the value reported?

Spousal consent records

Spouses may elect to treat third party gifts as made half by each if both were U.S. citizens or residents when the gifts occurred, were married then, and did not remarry later that year. Both must consent for all such gifts that year. Gifts between spouses cannot be split.

Attach a signed and dated Notice of Consent to the donor spouse's return, consenting to treat all third party gifts as made half by each spouse. If only one spouse must file, only one notice is required.

If both spouses must file, each should execute a notice for attachment to the donor spouse's return. Spouses cannot file a joint gift tax return.

Ask your preparer to check consent timing before filing.

GST allocation and election records

Gather prior transfer records, GST exemption allocations and election statements. Keep the trust identification information beside them for your review.

To allocate GST exemption to transfers not reported on the current Form 709, attach a statement entitled “Notice of Allocation.” For each trust or transfer, include:

Clear identification, including the trust's employer identification number if known.
The trust asset value at the allocation's effective date.
The exemption allocated, which may be expressed as a formula, and the resulting inclusion ratio.
For a late allocation, the year the transfer was reported on Form 709.

Ask: Do the allocation notices and election statements match the transfers being reviewed?

Fair market value is the price at which property would change hands between a willing buyer and willing seller, neither compelled to act and both reasonably informed.

Estate tax inclusion period is the period after a lifetime transfer during which the property would be included in the transferor's gross estate if the transferor died. It ends no later than a generation skipping transfer of the property or the transferor's death.

Four resources for your review

Federal estate, gift and GST tax. Open the hub to put the three taxes in context before discussing the returns and election records you have gathered.
Estate administration records and questions checklist. Bring this to the discussion if gathering tax records is part of a broader estate administration assignment.
Questions for an insurance and estate liquidity review. Open this when your document folder includes insurance policies and you want a focused list of questions for the insurance discussion.

Start with the questions that matter

A document folder is a starting point for a conversation about your family's needs. This investor perspective emphasizes asking questions before offering answers.

"Many of our investors are high net worth folks and they have the same problem that I had. So it's your job as a syndicator, my job as a syndicator to find my investor's needs. What is my investor looking for? I'll sit down with an investor and have that conversation."
From an Investor Advantage talk hosted by Richard C. Wilson

Common questions

What determines the effective timing of an allocation during an estate tax inclusion period?

A generation-skipping transfer tax exemption allocation made at transfer takes effect at the end of the estate tax inclusion period when the transferred property is subject to an estate tax inclusion period.

Who signs Form 706 when there is more than one executor?

One coexecutor's signature is sufficient, but every listed executor remains responsible for the filed return and liable for penalties for erroneous or false returns. The filing executor must sign the declaration under penalties of perjury.

When is a required estate tax return due?

An estate tax return required under the federal estate tax filing statute is due within nine months after death. Use Form 4768 to request an automatic six month filing extension.

Does a filing extension extend the time to pay?

No. When a tax return is required, payment is generally due by its original filing deadline without waiting for an assessment or demand, subject to statutory exceptions. Separate payment relief requires its own review.

How long should tax records be kept?

Keep tax books and records as long as their contents may become material to administering federal tax law. There is no universal destruction date here. If prior gift returns were filed, identify them and list their years or quarters chronologically on Form 709 Schedule B.

Sources

IRS Instructions for Form 706: attachments, signatures and filing extensions.
IRS Instructions for Form 709: disclosure, valuation attachments, spousal consent, GST allocation notices and record retention.
Treasury Regulation §20.2031-3: business valuation documentation.
IRC §6501 and Treasury Regulation §301.6501(c)-1: assessment periods and adequate disclosure.
IRC §2513: gift splitting conditions.
IRC §2642: estate tax inclusion periods and allocation timing.
Treasury Regulation §20.2031-1: fair market value.
IRC §6075: return deadlines.
IRC §6151: payment deadlines.

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