The estate isn’t taxable. No Form 706 required. That’s the conclusion many executors reach, and in a significant number of cases it costs the surviving spouse millions.
The One Big Beautiful Bill Act (Public Law 119-21), signed July 4, 2025, raised the federal basic exclusion amount to $15,000,000 per individual for 2026, up from $13,990,000 in 2025. At that threshold, the vast majority of estates won’t owe federal estate tax. But owing no tax and having no reason to file are two different things. The portability election, available only through a timely Form 706, is where the real action is for most estates practitioners encounter.
When Is Form 706 Actually Required?
Form 706 is required when the gross estate of a U.S. citizen or resident, combined with adjusted taxable gifts made after 1976 and any applicable specific gift tax exemption, exceeds the basic exclusion amount for the year of death. For decedents dying in 2026, that threshold is $15,000,000.
The gross estate is broader than the probate estate. It includes everything the decedent owned or had certain interests in at fair market value on the date of death: cash, securities, real estate, closely held business interests, retirement accounts, life insurance proceeds where the decedent held incidents of ownership, annuities, and interests in trusts. Non-probate assets are not excluded simply because they pass outside a will.
The gross estate calculation is where surprises happen.
Adjusted taxable gifts, meaning taxable gifts made after December 31, 1976 that aren’t already included in the gross estate, are added to the gross estate for threshold purposes. An estate that appears to be comfortably below $15,000,000 can cross the filing threshold once lifetime gifts are factored in.
Portability Changes the Filing Calculus
Under IRC section 2010(c), a surviving spouse can use the deceased spouse’s unused exclusion (DSUE) amount for their own gift and estate tax purposes. The OBBBA did not change the portability rules. What changed is the size of the potential DSUE: with a $15,000,000 basic exclusion per individual, a married couple’s combined effective exclusion can reach $30,000,000 when portability is properly elected.
The election is not automatic. To transfer the DSUE to the surviving spouse, the executor must file a complete and timely Form 706 and make the portability election on the return. Timely means within nine months of the decedent’s date of death, or within a valid six-month extension obtained by filing Form 4768 before the original due date.
A missed election is an irrevocable loss.
For estates that don’t otherwise meet the filing threshold, Revenue Procedure 2022-32 provides late election relief: executors of qualifying estates can file up to five years after the date of death to elect portability, provided the return is complete and the estate was not otherwise required to file. That relief exists, but it’s a fallback, not a plan.
What Does the Return Actually Cover?
Form 706 spans more than a dozen schedules, each tied to a specific category of assets or deductions. Schedules A through I address the gross estate: real property, stocks and bonds, mortgages and notes, insurance, jointly owned property, other miscellaneous property, transfers during life, powers of appointment, and annuities. The return then accounts for deductions, including funeral and administration expenses, debts, mortgages, losses, charitable bequests, and the marital deduction.
Valuations are the most technically demanding part of the return. Every asset must be reported at fair market value on the date of death, defined as the price a willing buyer would pay a willing seller with full knowledge of relevant facts and no compulsion to transact. For publicly traded securities, that’s a straightforward calculation. For closely held business interests, real estate, artwork, and other non-liquid assets, a qualified appraisal is typically required and is the first line of defense in any IRS examination.
The GST tax is also reported on Form 706. Direct skips from the estate to skip persons are computed on Schedule R, and GST exemption allocations are made there as well.
Deadlines and Extensions
The estate tax and GST tax are due within nine months of the decedent’s date of death. An automatic six-month extension to file is available by filing Form 4768 on or before the original due date, extending the filing deadline to 15 months after death. The extension applies to the filing obligation only. Tax due continues to accrue interest from the original nine-month deadline regardless of any extension granted.
For estates paying tax, the distinction between the extension to file and the extension to pay matters considerably. Section 6166 allows installment payment of estate tax attributable to closely held business interests, and section 6163 permits deferral of tax on reversionary or remainder interests, but both require elections made on the return itself. Neither extends automatically.
The OBBBA Exemption Is Permanent, but State Tax Still Applies
OBBBA made the $15,000,000 basic exclusion permanent by removing the sunset provision that would have reduced it to roughly $7,000,000 in 2026. Going forward, the exclusion is indexed for inflation using 2025 as the new base year. The top federal estate tax rate remains 40%.
Federal permanence doesn’t resolve state exposure. Eighteen states and the District of Columbia impose their own estate or inheritance taxes, many with exemption thresholds well below the federal level. An estate that generates no federal filing obligation can still face state tax, and state filing deadlines and valuation requirements operate independently. Practitioners handling estate administrations in those jurisdictions layer the state analysis on top of the federal, not instead of it.
Sources: IRS, What’s New: Estate and Gift Tax (irs.gov); IRS FAQ on Estate Taxes (irs.gov); Instructions for Form 706 (Rev. September 2025); About Form 4768 (irs.gov); IRS Revenue Procedure 2022-32; Public Law 119-21 (One Big Beautiful Bill Act).