Submitted By: Ralph
Answered: June 24, 2016 10:59 am

My wife died recently and I’ve been receiving mixed advice about whether I need to file Form 706. Is this form optional?

If the value of your wife’s estate, including not only probate assets but also IRAs, life insurance owned by her, annuities, and jointly owned property, is more than an applicable threshold ($5.43 million in 2015; $5.45 million in 2016), the federal estate tax return must be filed. This is so even if there is no tax due (e.g., all the property was left to you and fully offset by the unlimited marital deduction). However, even if you are not required to file because the estate is smaller than the threshold, you should do so anyway because of “portability.” By filing the return, you can secure the unused portion of your wife’s estate tax exemption (technically referred to as the deceased spouse’s unused exemption or DSUE). For example, say your wife died in 2015 with an estate worth $2 million. If you file the Form 706 (there is no “short form” for this purpose), when you die your estate can increase your own exemption amount by $3.43 million ($5.43 million minus $2 million).

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Tax Glossary

Cash method of accounting

Reporting income when actually or constructively received and deducting expenses when paid. Certain businesses may not use the cash method.

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