How to Fill Out IRS Form 706-NA (w/Examples) + FAQs

To fill out IRS Form 706-NA, you must report and value all U.S.-based assets of a nonresident decedent, subtract allowable deductions, compute the estate tax due (if any), and file the return within 9 months of the decedent’s death. This process ensures any U.S. estate tax owed by a non-U.S. citizen/nonresident’s estate is correctly calculated and paid.

Did you know? The U.S. estate tax exemption for nonresident aliens is only $60,000 – a tiny fraction (around 0.5%) of the multi-million dollar exemption U.S. citizens get. This means many foreign investors with U.S. holdings can unexpectedly trigger a U.S. estate tax filing. The stakes are high, but with the right guidance, you can navigate Form 706-NA confidently.

Key Takeaways:

• 💰 Low Exemption: Nonresident estates must file Form 706-NA if U.S.-situated assets exceed $60,000 (far lower than the ~$12 million exemption for U.S. citizens).
• 🗓️ Deadline & Extension: The form is due 9 months after death, but you can request a 6-month extension (15 months total) using Form 4768. Interest accrues on any tax not paid by the original deadline.
• 🏠 U.S. Assets Only: Only U.S.-sitused assets (like U.S. real estate, stocks in U.S. companies, tangible property in the U.S.) are reported. Foreign assets are excluded from this form, though you may need their values for certain calculations.
• 📄 Proper Documentation: A complete filing includes the filled Form 706-NA, required schedules and attachments (death certificate, will, appraisals, etc.), and any treaty statements or additional forms (e.g. Form 8833 for treaty-based positions, or QDOT election forms if applicable).
• ⚖️ Tax Treaties & Spouse Relief: Estate tax treaties with countries like Canada, UK, France, etc., can increase the effective exemption or lower tax. Also, a Qualified Domestic Trust (QDOT) can defer estate tax on transfers to a non-U.S. citizen surviving spouse, since the normal unlimited marital deduction only applies when the spouse is a U.S. citizen.

Now, let’s break down what Form 706-NA is, who needs to file it, and step-by-step instructions to fill it out correctly. We’ll also cover common pitfalls, special state law nuances, real-world examples, and FAQs to address the most pressing questions.

What Is IRS Form 706-NA and Who Must File It?

IRS Form 706-NA is the United States Estate (and Generation-Skipping Transfer) Tax Return for the estate of a nonresident decedent who was not a U.S. citizen. In simpler terms, if a person who was neither a U.S. citizen nor a U.S. resident (for estate tax purposes) dies owning U.S.-situated assets, this is the tax return used to calculate and report any U.S. estate tax due on those assets.

Who must file? The executor (or personal representative) of the estate must file Form 706-NA if the decedent’s U.S.-situated assets exceed $60,000 in value as of the date of death. This $60,000 threshold is much lower than the exemption for U.S. domiciliaries, so it often catches families by surprise. Even if the estate ultimately owes no tax due to deductions or treaties, the filing requirement is triggered once U.S. assets above $60k are present. (For context, a single U.S. stock portfolio or real estate property can easily exceed this threshold.)

Nonresident vs. Resident: For estate tax, “nonresident not a citizen” (often abbreviated NRNC) is determined by domicile, not just physical presence. Domicile means the person’s permanent home or intention to remain. A non-U.S. citizen who primarily lived abroad and had no intent to reside indefinitely in the U.S. is treated as a nonresident decedent (and would use Form 706-NA). This holds even if they spent considerable time in the U.S. – what matters is that their true fixed home was outside the U.S. (Conversely, a non-citizen who was domiciled in the U.S. would file the regular Form 706, not 706-NA, and get the larger exemption.)

Examples of who needs to file Form 706-NA:

• A Canadian citizen living in Canada passes away owning a condo in Florida worth $300,000 – the executor must file Form 706-NA because U.S. real estate > $60k.
• A German investor (non-U.S. resident) dies holding $100,000 worth of U.S. stocks in a brokerage account – Form 706-NA filing is required, since U.S. securities count toward the $60k threshold.
• A nonresident had only $50,000 in a U.S. bank account – no filing is required in this case, because bank deposits are generally exempt and, in any case, the total U.S. assets are under $60k.

Who files if there’s no U.S. executor? Often the decedent’s executor is abroad. If no executor or administrator is appointed within the U.S., the IRS allows any person in actual or constructive possession of the U.S. assets to file the return. In practice, that could be a family member, heir, or even a bank holding the assets – but usually the foreign executor will coordinate the filing, sometimes via a U.S. attorney or agent.

Deadline: Form 706-NA is due 9 months after the date of death. For example, if a nonresident individual died on January 10, 2025, the estate tax return is due by October 10, 2025. If more time is needed, you can file Form 4768 to get an automatic 6-month extension (giving up to 15 months total from date of death to file). Important: An extension to file does not extend time to pay any tax due. Any estimated tax should be paid by the 9-month mark to avoid interest and penalties.

Generation-Skipping Transfer (GST) Tax: The form’s title mentions GST tax as well. GST tax might apply if the estate transfers assets to grandchildren or skip-generation beneficiaries. For most estates, this is not common, but the form allows calculation of GST tax if applicable. If your estate plan involves transfers to much younger beneficiaries (like grandkids), be aware that a flat 40% GST tax could apply on top of estate tax, but only beyond substantial separate GST exemptions (often aligned with the regular exemption for U.S. persons). For simplicity, we’ll focus on the estate tax portion, as GST issues for nonresidents are rare.

Important Concepts and Definitions (Executor, Decedent, U.S. Assets, etc.)

Before diving into the form itself, it’s crucial to understand some key terms and concepts related to Form 706-NA and U.S. estate taxation of nonresidents:

• Decedent: The person who has died. In our context, the decedent is a nonresident, non-U.S. citizen whose estate may owe U.S. tax on U.S. assets.
• Executor/Personal Representative: The individual responsible for administering the decedent’s estate and filing required tax returns. This could be an executor named in the will, an administrator appointed by a court, or any person handling the assets. The executor signs Form 706-NA and is responsible for its accuracy and any payments.
• U.S.-Sitused Assets: Assets located in or deemed located in the United States for estate tax purposes. This includes:
  • Real Estate in the U.S.: Land or buildings located in any U.S. state or D.C.
  • Tangible Personal Property in the U.S.: Physical items located in the U.S. (e.g. jewelry or art kept in a U.S. safe deposit box).
  • Stock of U.S. Corporations: Shares of companies incorporated in the U.S. count as U.S. assets for estate tax, regardless of where the stock certificates are held or the brokerage is located. For example, holding Apple or Google stock (U.S. corporations) makes those shares U.S. situs assets in your estate.
  • U.S. Business Assets: If the decedent owned a business or partnership interest that holds U.S. property, that interest may be partly U.S.-sitused.
  • Debt Obligations of U.S. persons or entities: Some U.S. bonds or loans might count, unless they qualify as exempt “portfolio debt” (many U.S. corporate or government bonds are actually exempt if properly structured).
• Excluded Assets: Certain assets are specifically exempt from being treated as U.S. situs for nonresidents, including:
  • Cash Deposits in U.S. Banks: Bank accounts (savings/checking/CDs) at U.S. banks are generally exempt from U.S. estate tax for nonresidents, as long as they aren’t connected to a U.S. trade or business. (This is a statutory exemption designed to encourage foreign investment in U.S. banks.)
  • Life Insurance Proceeds: Amounts payable from life insurance on the decedent’s life are not included in the gross estate for estate tax – this is true for both U.S. citizens and nonresidents.
  • Foreign Assets: Obviously, any property outside the U.S. – like a home in the decedent’s country or non-U.S. securities – is not subject to U.S. estate tax and not reported on Form 706-NA.
  • Certain Portfolio Debt and Tax-Free Securities: e.g. foreign-held U.S. Treasury bonds or certain corporate bonds can be exempt under the “portfolio interest” exception.
• Domicile: As mentioned, “domicile” is the key test for estate tax residency. It’s a facts-and-circumstances determination of a person’s permanent home. Owning property or spending time in the U.S. doesn’t by itself make someone U.S.-domiciled – the person must also have intended to stay in the U.S. indefinitely. Case law on domicile has shown that factors such as visa status, location of family, where one registers to vote or pays local taxes, etc., can all evidence intent. Why this matters: If the IRS ever contends that a decedent was actually domiciled in the U.S., the estate might be liable for U.S. estate tax on worldwide assets with the larger exemption, instead of just U.S. assets with the $60k exemption. For most straightforward cases (clearly nonresident individuals), this isn’t in dispute.
• Unified Credit / Exemption: U.S. citizens and domiciliaries currently enjoy a $12.92 million estate tax exemption (for deaths in 2023; indexed annually). Nonresident decedents, by default, get a much smaller credit of $13,000, which effectively shelters only $60,000 of U.S. assets from estate tax. This tiny exemption is why Form 706-NA often results in tax due even on relatively modest U.S. holdings. However, if an estate tax treaty applies (see below), the estate may claim a larger pro-rata unified credit or exemption equivalent.
• Estate Tax Treaties: The U.S. has bilateral estate (or inheritance) tax treaties with several countries (including Canada, UK, France, Germany, Japan, Australia, and others). These treaties can dramatically affect how Form 706-NA is prepared:
  • They often allow a nonresident’s estate to claim a larger exemption than $60,000, usually proportional to the fraction of the estate that U.S. assets represent. For example, if a treaty country decedent had 50% of their worldwide estate in U.S. assets, they might claim 50% of the normal U.S. exemption (i.e., ~50% of $12.92M) instead of just $60k. This can eliminate or reduce tax.
  • Some treaties (like the U.S.-Canada treaty) provide a full marital deduction for transfers to a surviving spouse, even if the spouse isn’t a U.S. citizen, or other relief.
  • Small estate clause: For example, under the U.S.-Canada treaty, if a Canadian resident’s worldwide estate is under approximately $1.2 million, their U.S. investments (like U.S. stocks) are exempt from U.S. estate tax entirely.
  • How to use treaties: To invoke treaty benefits on Form 706-NA, you generally must attach a statement to the return citing the treaty and the specific provisions you are applying. Often Form 8833 (Treaty-Based Return Position Disclosure) is filed as well to formally disclose the treaty position. Treaties can be complex, so professional advice is often needed to use them correctly.
• Marital Deduction & QDOT: In U.S. estate tax, assets left to a surviving spouse who is a U.S. citizen qualify for an unlimited marital deduction (no estate tax on those transfers). However, if the surviving spouse is not a U.S. citizen (even if they are a U.S. resident), the unlimited marital deduction does not apply outright. Instead, the estate can only get a marital deduction if the assets pass into a Qualified Domestic Trust (QDOT) for the spouse’s benefit. A QDOT is a special trust that defers estate tax until distributions or certain events, ensuring the IRS can eventually collect tax on that portion.
  • If your decedent left assets to a non-citizen spouse, a QDOT election may be made on Form 706-NA (and the trust must be set up) to secure a marital deduction. This is a complex area: essentially it allows deferral of U.S. estate tax on the spouse’s share, but with strict rules.
  • If the spouse is a U.S. citizen, Form 706-NA can claim the marital deduction directly, potentially reducing taxable estate to zero (though a return might still be filed if the gross U.S. assets exceed $60k, to show calculations).
• Transfer Certificate: This is not a term on the form, but extremely important in practice. A Federal Transfer Certificate (IRS Form 5173) is a clearance letter from the IRS that the estate’s U.S. tax obligations are satisfied or that no tax is due. U.S. financial institutions or stock transfer agents often require this certificate before releasing or transferring assets of a nonresident decedent. Why it matters: Even if no tax is owed, if an estate is above $60k, you might need to file Form 706-NA and obtain the transfer certificate to un-freeze the decedent’s U.S. bank account or stock holdings. The IRS will issue a transfer certificate typically after the 706-NA is filed and any tax paid. (Be prepared: it can take many months, even a year or more, after filing, to receive this certificate.)
• Probate: Probate is the legal process of administering a decedent’s estate. A nonresident who owned U.S. real estate or other titled assets may require ancillary probate in each state where property is located. While probate is separate from taxes, it interplays with this topic because in order to transfer a U.S. house to heirs or sell it, a local court may need to authorize it. Additionally, some states or asset holders won’t allow transfer without that IRS tax clearance. It’s important to coordinate the tax filings with the estate’s legal process (probate or trust administration). Having U.S. assets in a foreigner’s estate can trigger both a U.S. tax filing (Form 706-NA) and a legal procedure in the state (or use of alternative measures like a revocable trust, if set up before, to avoid probate).

Understanding these concepts will help make sense of the form and ensure you don’t miss anything vital. Now, with these basics covered, let’s walk through how to fill out Form 706-NA step by step.

Mastering Form 706-NA: Step-by-Step Filing Guide

Filling out Form 706-NA can be intricate, but breaking it into steps makes it manageable. Below is a step-by-step guide to completing the form correctly, including gathering information, filling each part of the form, and submitting it. Remember to write neatly or type (if using fillable PDF) and double-check all entries, as mistakes can cause delays or IRS inquiries.

Step 1: Confirm the Need to File (Threshold Test)

Before anything else, verify that a Form 706-NA is actually required. Ask these questions:

• Did the decedent own over $60,000 in U.S.-situated assets? Calculate the date-of-death fair market value of all U.S. assets (see the earlier section on what counts as U.S. assets). If the total is $60,000 or less, no federal estate tax return is required for the nonresident estate. If it exceeds $60,000, you almost certainly need to file Form 706-NA.
• Were any large U.S. gifts made by the decedent during life? If the decedent gifted U.S. property in 1977 or later, it could affect the filing even if current assets are under $60k. (Technical note: any taxable gift made by a nonresident of U.S. tangible property – such as U.S. real estate – might count against the $60k exemption if the unified credit was used. Most nonresidents don’t file gift tax returns unless gifting U.S. real estate or U.S.-situs tangible assets, since gifts of intangibles like stocks by nonresidents are exempt from gift tax. So this scenario is uncommon.)
• Is there an applicable treaty that changes the picture? If a treaty applies that effectively raises the exemption, you might wonder if you need to file at all. Generally, yes – you file to claim the treaty benefits. For example, say a treaty allows a $5 million exemption and your decedent’s U.S. assets are $1 million. Even if no tax would be due after the treaty exemption, you still file the Form 706-NA (and attach the treaty statement) because without the treaty, the $60k threshold was exceeded. The return will show zero tax due because of the treaty, but it’s the proper way to get the IRS to acknowledge the treaty exemption and issue a transfer certificate.

If you determine a filing is needed, proceed with the following steps. If it’s not needed (truly under the threshold with no quirks), you can breathe easier regarding the federal filing – though you might still need to deal with banks or state processes.

Step 2: Gather All Necessary Documents and Information

Successful completion of Form 706-NA requires comprehensive information about the decedent’s assets and personal details. Before filling out anything, assemble the following:

• Death Certificate: You will need a certified copy of the decedent’s death certificate. The IRS requires one attached to the return.
• The Will (if any): If the decedent died with a will (testate), get a certified copy of the will. The IRS instructions say to attach a certified copy. If obtaining a certified copy is impractical, you can attach an ordinary copy and explain why a certified one isn’t provided (but certified is preferred).
• Financial Statements and Asset Lists: Inventory all U.S.-based assets:
  • Bank/brokerage statements for date of death (for U.S. accounts, stocks, bonds).
  • Deeds or appraisals for U.S. real estate (with valuations as of date of death).
  • Business or partnership valuations if applicable.
  • List of any other tangible items in the U.S. (vehicles, valuables, etc., with appraisals if significant).
• Valuations: For stocks and bonds, you will use market prices on the date of death (or the alternate valuation date 6 months after death, if that election is beneficial – alternate valuation is an option if it lowers both the estate value and tax due, but consult instructions or a professional if considering this). For real estate, a professional appraisal as of the date of death is often required to substantiate the value. Any unique asset (art, jewelry, etc.), get an appraisal. Accurate values are critical – undervaluing assets to slip under the $60k threshold or reduce tax is illegal and can incur penalties.
• Worldwide Asset Information (for Treaty or Deductions): If you will invoke a treaty or need to prorate deductions, you’ll need the total value of the decedent’s worldwide estate. This includes all assets everywhere (U.S. + non-U.S.). For treaty calculations or certain deductions, the IRS requires knowing the size of the entire estate (converted to USD) to compute proportional relief. Gather values of major foreign assets and liabilities as well.
• Debts and Expenses: List any debts that could be deductible:
  • Mortgages or liens on U.S. property.
  • Unpaid bills, credit card balances, or other debts the decedent owed at death.
  • Funeral expenses (even if paid outside the U.S., part may be deductible).
  • Estate administration expenses (attorney fees, etc.). Keep receipts or invoices.
• Previous Tax Returns: If the decedent ever filed U.S. tax returns (like Form 706-NA for a predeceased spouse, or U.S. gift tax returns, etc.), have those on hand. The instructions ask for copies of any U.S. gift tax returns the decedent filed in the past.
• Identification Numbers: If the decedent had a U.S. Social Security Number (SSN) or Individual Taxpayer ID (ITIN), note it. If not, the IRS will assign an identifying number for this estate (sometimes called an IRSN – IRS Number). As the executor, you should also consider obtaining an Employer Identification Number (EIN) for the estate itself (though for Form 706-NA it’s not strictly required to list an estate EIN, it’s useful for handling any U.S. bank accounts or payments).
• Executor and Attorney Info: You’ll need the names, addresses, and contact details of the executor(s) and any attorney or representative handling the filing. If you plan to authorize someone to communicate with the IRS about the return, you might fill in that info in Part III of the form and/or attach a power of attorney (Form 2848).
• Estate Tax Rate Schedule: Have the estate tax rate table handy (the form instructions provide it, and rates range from 18% starting at the first dollar above exemption up to 40% on amounts over $1 million taxable for nonresidents – note that the brackets compress quickly, reaching 40% at fairly low levels compared to $12M; practically, any taxable estate portion above ~$1 million is at 40% for nonresidents).
• Extension (if needed): If you already filed Form 4768 for extension, have proof of that, and note the new deadline.
• Payment method: If you anticipate tax due, figure out how you will pay. U.S. estate tax for foreign estates can be paid by check (drawn on U.S. funds) or international wire. The IRS has instructions for foreign electronic payments – you might need to plan this with your bank ahead of time. Many foreign executors struggle with payment logistics, so start early (especially for large sums, international transfer limits, etc.).

Having all these in one place will make filling out the form smoother and help avoid last-minute scrambles.

Step 3: Complete Part I – Decedent, Executor, and Attorney Information

Part I of Form 706-NA is straightforward biographical data:

• Decedent’s info: Enter the decedent’s name, date of death, and domicile (country) at time of death. For domicile, you typically put the country (and possibly city) where they resided permanently. Example: “London, United Kingdom.”
• Social Security Number: Most nonresidents won’t have a U.S. Social Security Number. If the decedent had an ITIN (Individual Tax ID Number) from having filed some U.S. tax return in the past, you can use that. Otherwise, leave the SSN field blank. The IRS will assign an identifier (IRSN) upon processing. (Do not invent a number or use a foreign ID number here.) It’s fine if blank.
• Executor’s info: Fill in the name and address of the executor or personal representative. If there are multiple co-executors, you might need to attach a statement or use the first executor’s info here and then list others in an attachment. Use a permanent address where mail can reliably reach the executor (important because the IRS will send any communications or billing here, and international mail can be slow – some estates use a U.S. attorney’s address for reliability).
• Attorney or representative: If an attorney, CPA, or enrolled agent is assisting and you want them to be able to discuss the return with the IRS, list their name, address, and CAF (Centralized Authorization File) number if known. This does not replace a power of attorney if you want them fully authorized, but filling it in allows the IRS to contact them with questions.
• Section for “Authorization” in Part I/III: Form 706-NA has a section where the executor can sign to authorize the listed attorney/representative to receive confidential information and communicate with the IRS about the return. Make sure the executor signs that part if you fill in a rep’s info. The representative themselves might also need to sign to confirm, depending on instructions (like a checkbox or line for their signature).
• Alternate contact: There may be a line for an alternate person to receive tax information (sometimes this is similar to Form 706’s approach). If your preparer or someone else should get copies of IRS letters, indicate it.
• Phone numbers: Include a phone number (with international dialing code if outside U.S.) for the executor and/or attorney. Email is not on the form typically, but you can’t expect the IRS to email you – they rely on mail or phone.

Be precise here – spelling of names, addresses, etc. – to avoid miscommunication. Once Part I is done, you’ve set the stage with who’s involved and who to contact.

Step 4: Tackle Part III – General Information Questions

Part III (yes, the form jumps to Part III next, leaving Part II for later) contains a series of Yes/No questions and short answers about the estate. These questions help the IRS capture key details. They often include:

• Citizenship and Residency Questions: e.g., “Was the decedent ever a U.S. citizen or lawful permanent resident (green card holder)? If so, when and how did U.S. citizenship or residency end?” Usually, for 706-NA, the decedent was not a U.S. citizen; if they were at one time but gave it up, that’s important to disclose. The IRS specifically asks if the decedent expatriated (gave up citizenship or long-term residency) within the last certain number of years, since special tax rules (like the covered expatriate rules) might apply.
• Domicile Explanation: Often a question asks something like, “On what basis are you claiming the decedent was domiciled outside the United States?” Here, you might briefly state: “Decedent was a lifelong resident of Country X, maintained permanent home there, only seasonal visits to U.S.” You might need to provide facts if domicile could be in doubt.
• Heir and Beneficiary Info: There may be questions like “Name of surviving spouse, if any, and their citizenship” (since spouse’s citizenship matters for marital deduction). Or “Primary heirs/beneficiaries and their countries”. This gives context, like if the estate went to a spouse or children.
• Prior Transfers: A common query: “Did the decedent make any taxable gifts or transfers in trust during lifetime?” If yes, and especially if any U.S. gift tax returns were filed, you’d answer yes and likely attach details. If no known large gifts, answer no.
• Property Situations: Possibly: “Did the decedent own any U.S. property jointly with another person?” If yes, you’ll have to clarify how joint property is treated (joint tenancy with right of survivorship, etc., because by default for a non-spouse joint owner, the decedent’s estate might include the full value unless you prove the co-owner contributed value).
• Powers of Appointment: Often estate tax forms ask if the decedent had any general power of appointment over property (basically, the power to direct someone else’s trust assets to any beneficiary). If they did, that property might be includible. Most people will answer “No” unless the decedent was involved in such trusts.
• Trusts and Transfers: Was any property transferred for less than full consideration in the 3 years before death (other than gifts already noted)? This captures certain things pulled back into the estate (like if someone transferred property but retained some powers).
• Treaty or Law Elections: A vital question on 706-NA is likely: “Are you relying on any provision of a treaty or special statute to claim a tax benefit (such as an increased exemption, marital deduction for non-citizen spouse, etc.)?” If yes, you must say so and are expected to attach a statement detailing the treaty and article. For example, “Yes – claiming benefits under U.S.-Germany Estate Tax Treaty, Article XYZ, to claim pro-rata unified credit.”
• QDOT trust: If there’s a surviving non-citizen spouse, there might be a question if a QDOT is being established to qualify for marital deduction. If yes, you’d answer and attach the relevant election statement and trust details.
• Miscellaneous: There could be a question about whether a qualified conservation easement (a special exclusion for land under conservation) is claimed – usually not common for foreign estates, but if decedent owned U.S. land and donated a conservation easement, note it.
• Executors/Personal Reps: They might ask if an executor was appointed by any foreign court, and who that is (if different from who’s filing).
• Transfer Certificate Request: Sometimes they ask if you’ve previously requested a transfer certificate or if one is needed urgently. If there’s a field or line for that, you can indicate you will be seeking one.

Take care to answer every applicable question in Part III. Use “N/A” or “No” as appropriate; do not leave questions blank unless instructions say to skip them. If any answer requires more information than fits, write “See attached statement” and attach a page with the details (make sure to label it Part III and reference the question number).

Step 5: Itemize U.S. Assets on Schedule A – Gross Estate in the United States

Schedule A is where you list each U.S.-situs asset, with details and values. It’s essentially an itemized list of the gross estate in the U.S.. Think of it as the master inventory for U.S. property.

Organize Schedule A into categories as the form instructs (it often mimics the categories of the main U.S. Form 706 schedules, like real estate, stocks, etc.). Typically, you might group assets like so (if not already pre-labeled on the form, you can label them):

• Real Estate (U.S.) – List each property:
  • Provide address or description, and indicate if it was jointly owned or had a mortgage.
  • Example: “1234 Ocean Drive, Miami, FL – Single family home – owned 100% by decedent.” Value: $500,000.
  • If there’s a mortgage, some forms have you still list full value here and then list the mortgage under deductions. (Do not subtract the mortgage from the value in Schedule A; gross estate means gross).
• Stocks and Bonds (U.S. corporations or debt) – List stock holdings:
  • Name of company, number of shares, cusip or ticker if possible, and date-of-death value (per share and total).
  • Example: “100 shares of Apple, Inc. – NASDAQ:AAPL – valued at $150 per share on 1/5/2025 = $15,000 total.”
  • For bonds, list issuer, face amount, interest rate, maturity, and FMV.
  • For publicly traded securities, attach calculations or sources for the market price on date of death (the instructions for Form 706 detail how to value stocks: typically the average of the high and low trading price on date of death).
• Cash Accounts (U.S.) – If any cash in U.S. brokerage or investment accounts (even though bank deposits in a plain bank account might be exempt, money in a brokerage sweep or cash in a non-bank institution could be considered differently – usually still exempt if just cash deposits, but clarify type). If it’s a standard bank like Chase or Citi, you might actually exclude it due to the exemption for bank deposits. However, to avoid confusion, you can list it and mark as “bank deposit – exempt” or exclude altogether. The IRS instructions clarify that bank accounts from U.S. banks are not includible, so one approach: don’t list them in the gross estate at all, but in a cover letter note that such-and-such account ($X) was a bank deposit and not included pursuant to IRC §2105.
• Partnership or Business Interests: If the decedent owned an interest in a partnership or LLC that holds U.S. assets, that gets complicated. Typically, you’d list the value of the interest and perhaps underlying U.S. asset portion. This may require a valuation of that interest. Provide as much detail as possible.
• Tangible Personal Property: Any valuable artwork, jewelry, vehicles physically located in the U.S. at death. Describe and list appraised values.
• Retirement Accounts: If a nonresident had, say, an IRA or 401(k) from past U.S. employment, that account is likely U.S. situs. List the account and value. (Note: U.S. retirement accounts in an estate can also trigger income tax considerations for beneficiaries, but for estate tax, just include the value.)
• Life insurance on decedent’s life is not included, so do not list death benefits as an asset. But if the decedent owned U.S. life insurance on someone else’s life, that policy’s value would be includible (rare scenario).
• Claims or unpaid wages: If a U.S. company owed the decedent money (like last paycheck or a contract payment), that could be an asset of the estate.
• Anything else of value in U.S.: (For example, a safe deposit box in New York with gold coins – the gold would be tangible property in the U.S., include it with a description and appraisal.)

For each item, the form usually has columns for Item number, Description, and Value. Use additional sheets if needed. Number the assets sequentially (1, 2, 3, …).

Important: If any asset was jointly owned, or has a designated beneficiary (like transfer-on-death accounts), indicate that in the description. Joint property: if joint with spouse, for example, state “Joint tenancy with spouse – include 50% of value = $X” (if the spouse contributed half the purchase, you might only include decedent’s half, but if not, possibly 100% – the rules differ for non-citizen spouse). Joint with someone else: typically full value gets included unless you can substantiate the surviving owner contributed to the property’s acquisition.

Currency conversion: All values must be in U.S. dollars. If some valuations were done in a foreign currency (say the home was appraised in euros), convert to USD at the date-of-death exchange rate. Attach a note on the exchange rate used. For consistency, you could use the Treasury’s published exchange rate or a reliable source for that date.

Sum up the total of Schedule A at the bottom. This sum is the Gross Estate in the U.S.. Let’s call it “Total U.S. assets = $___”.

Step 6: List Deductions and Exemptions on Schedule B

Schedule B is where you report allowable deductions to arrive at the taxable estate in the U.S. This is analogous to the deductions on a normal estate tax return but only those related to the U.S. assets are allowed (and some may need to be prorated).

Common deductions and how to handle them:

• Funeral Expenses: If the decedent’s estate paid funeral and burial costs, a portion may be deductible. However, for nonresident estates, funeral and administration expenses are generally prorated by the ratio of U.S. assets to worldwide assets. For example, if the total funeral cost was $10,000 and U.S. assets are 50% of the total estate, you might deduct $5,000 on the U.S. return. Compute the worldwide gross estate (for this ratio, use values of everything everywhere).
• Estate Administration Expenses: These include attorney fees, executor fees, appraisal costs, etc., related to settling the estate. These too would be prorated by U.S. vs worldwide, unless they specifically pertain only to U.S. assets. If you hired a U.S. attorney solely to handle the U.S. filing, perhaps that fee could be fully allocated to U.S. estate. But general estate costs should be prorated.
• Debts and Mortgages: Debts are deductible in the proportion that the associated asset is included. For instance, if there was a mortgage of $200,000 on the U.S. home worth $500,000, that mortgage is a direct lien on a U.S. asset so it can be deducted (some instructions say even direct liabilities must be prorated by U.S./worldwide – but a safe approach: list the full mortgage under deductions. The IRS will apply the rules accordingly; often if a debt is tied to specific property, it can be fully deducted against that property’s value in determining net taxable amount, but overall deductions still not exceeding the proportion of U.S. to worldwide).
• Unpaid Taxes: If the decedent owed any U.S. income taxes or property taxes on U.S. assets at death, those could be debts deductible.
• Losses during Administration: If any U.S. asset was lost, damaged, or destroyed during estate administration (rare), there’s a deduction for that casualty/theft loss.
• Charitable Bequests: If the decedent’s will left certain U.S. assets to a U.S. charity or a government entity, those transfers can be deducted. (For nonresidents, generally the charitable deduction is allowed only for bequests to U.S. charities or governments, unless a treaty allows broader).
• Marital Deduction: If the decedent left U.S. assets to a surviving spouse, this can be deducted only if: the spouse is a U.S. citizen (then full marital deduction allowed), or the assets pass into a QDOT trust for a non-citizen spouse. If the spouse is non-citizen and no QDOT, you cannot deduct those assets’ value – they remain taxable. So in Schedule B, you’d include a marital deduction only if qualifying. E.g., “Marital deduction – $300,000 for assets passing to U.S. citizen spouse” or “Marital deduction (QDOT) – $300,000” (with a statement that a QDOT election is made and trust details).
• State Death Taxes: If any U.S. state estate or inheritance tax was paid on these assets, that could be a deduction on the federal return as well. For instance, if the decedent owned New York property and the estate paid New York estate tax, you list that tax here.
• Personal Exemption: There isn’t a “personal exemption” per se for estate tax – the $60,000 is handled via the credit rather than a deduction. So no line item for that.

When listing deductions on Schedule B, provide a short description for each and the amount. If prorating, you might say “Funeral expenses (prorated 40% to U.S. estate) – $4,000”.

Add up all Schedule B deductions. Let’s say total deductions = $D.

Now, you calculate the Taxable Estate in the U.S.:
Take the Total U.S. Gross Estate (Schedule A) minus Total Deductions (Schedule B).
Example: $800,000 U.S. assets minus $100,000 deductions = $700,000 taxable estate.

If the decedent died with a small U.S. estate under $60k, usually we wouldn’t even be filing, but if you are filing perhaps due to treaty reasons or something, the taxable estate might be $0 after credits – but normally under threshold you skip filing.

It’s good practice to attach supporting documents for major deductions:

• Copies of funeral bills, paid receipts.
• Statements of debts.
• Appraisal or evidence for any loss claimed.
• For marital deduction via QDOT, a QDOT statement and trust details as required by IRS (the form instructions outline what to attach – typically a statement that the trust meets QDOT requirements, the trust’s Tax ID, and that the executor elects QDOT treatment under section 2056A).
• For charitable, copy of the will provision or trust document showing the charitable bequest.

Step 7: Calculate the Estate Tax in Part II – Tax Computation

Now you have the taxable estate (in USD) from the schedules. Part II of Form 706-NA is where you actually compute the estate tax due.

The general steps in computation:

1. Gross estate in U.S. (from Schedule A total).
2. Minus deductions (from Schedule B total).
3. Taxable estate = result.
4. Tentative tax: Apply the IRS estate tax rate table to the taxable estate amount. The table is graduated:
   • For example, roughly: 18% on the first $10,000 of taxable amount, 20% on the next chunk, … scaling up to 40%. (In reality, by $1 million taxable, it’s at 40%.)
   • The form usually has you compute this by either a worksheet or plugging into the tax brackets.
   • Pro tip: The IRS often provides a tax computation worksheet: essentially tax = 0.18 * first $10k + 0.20 * (next $10k) + … etc. To simplify, they also give a formula: for amounts over certain breakpoints, use a base plus a percentage of the excess. If you’re not comfortable calculating manually, refer to the instructions or have a tax professional compute the exact tax.
5. Unified Credit: Now subtract the allowable unified credit. By default, this credit is $13,000 for nonresidents (which covers the tax on $60,000). If no treaty, enter $13,000 (or less if the estate is exactly at threshold, but typically it’s full $13k credit).
   • If a treaty applies and allows a larger credit, you would enter that larger credit amount here. For instance, if by treaty calculation the estate can use a $5,000,000 exemption, the corresponding credit might be around $1,945,800 (that’s the tax on $5M under U.S. rate schedule). You’d show that here and attach the treaty computation. Make sure to clearly indicate on the return (perhaps in Part III or a margins note) “Treaty credit claimed per attached statement.”
6. Tax after credit: Subtract the credit from the tentative tax to get Net estate tax. If the credit is larger than the tentative tax, then zero out the tax (but don’t claim a negative – minimum tax due is $0).
7. GST tax (if any): If you had any generation-skipping transfers, compute that separately and add to the tax. Most will be none, so likely skip or put $0 for GST.
8. Total tax due: This is the figure to be paid.

If the decedent had paid any prior gift taxes or had a credit for tax on prior transfers (say they inherited something and paid estate tax on it recently, which can sometimes credit), those would also be factored in Part II. But those situations are rare for nonresidents and go beyond basic filing.

Cross-checking example: Suppose after deductions, the taxable estate is $700,000. The tentative tax on $700k (just hypothetical):
The tax bracket formula might yield something like ~$229,800 (just an example; at $1M it’s about $345k, at $500k maybe ~$155k, so $700k maybe around $229k).
Then subtract the $13,000 credit = $216,800 net tax due. That would be the estate tax to pay to IRS.

However, if a treaty allowed an exemption of $700k equivalent, the credit might wipe it out.
For instance, a UK decedent with $700k U.S. assets and $7 million worldwide might get 10% of the full credit (if $700k is 10% of total estate $7M), so credit = 10% of $4,772,800 (2025 full credit) ~ $477,280, which more than covers the $229,800 tax, leaving $0 due. The form would show $0 due after credit, but you must show the math and treaty reference.

Attach computations: If you did anything other than a straight $13k credit, attach a worksheet. Even if just $13k, the form likely has a line fixed at that unless decedent had used some credit in gifts.

Step 8: Fill in Payment and Certification Details

On the form, after the tax computation, there may be lines to indicate:

• Amount of tax due (from Part II).
• Amount of tax being paid with the return. Ideally, you pay the full amount by the due date. If you had already made an estimated payment or something, note it.
• Interest or penalties: The form itself won’t calculate interest; the IRS will bill that if you’re late. There’s no need to try to prepay interest – just pay tax and any known fixed penalties if applicable.
• If zero tax due, it might say “0” and that’s fine – you’re filing for disclosure or clearance purposes.

The executor (or each co-executor) will then sign the return under penalty of perjury, usually at the bottom of Part II page. Make sure to sign and date it. If someone prepared the form on the executor’s behalf (like an accountant), that preparer may sign in the paid preparer section with their PTIN (though for estate returns, a paid preparer signature is common if it was professionally prepared).

Double-check everything:

• Names match throughout.
• All required fields completed.
• Schedules A and B totals carried to Part II correctly.
• Credit applied appropriately.
• Any attachments referenced are included.

Step 9: Attach All Required Schedules, Statements, and Documents

Before you seal up the package, ensure you include the necessary attachments. Common required attachments for Form 706-NA include:

• Certified Death Certificate (copy).
• Certified Copy of Will (if the decedent had a will). If not, indicate the decedent died intestate.
• Appraisals for real estate or valuable property.
• Copies of U.S. Gift Tax returns (Form 709) the decedent filed, if any (for completeness, as instructed).
• Estate Tax Treaty Statement (if claiming treaty benefits). Outline what treaty and article, the computation of treaty-based exemption or credit, and include a declaration per Form 8833 requirements if applicable. Some practitioners just attach Form 8833 itself plus a narrative.
• QDOT election statement (if applicable). This might require specific language: basically, that the executor is electing under IRC 2056A to treat a trust as QDOT and list the trust’s EIN and trustees. Also attach a copy of the trust instrument if possible for IRS review.
• Power of Attorney (Form 2848) if an attorney/CPA will represent the estate before IRS beyond just being listed in Part I. This lets them speak to IRS or resolve issues if they arise.
• Form 8971 (Basis Reporting) – Note: Estates that file an estate tax return (including 706-NA) typically must also send Form 8971 to report the final value of assets to beneficiaries for basis purposes, within 30 days of filing the return. Check if this requirement applies here (it usually does if there are reportable assets and the return is filed). It’s filed separately, not with the 706-NA, but be aware to comply after.
• Translations: If any document (will, death cert, etc.) is in a foreign language, attach an English translation.
• Miscellaneous: If you answered certain Part III questions with “yes,” some require explanation attachments (like details of any litigation involving the estate, etc. – typically not, but just ensure any question requiring a narrative gets one).

Organize the return neatly:

• Form 706-NA pages on top (Parts I, II, III, Schedules A, B).
• Then attachments in order: death cert, will, etc.
• Clearly label each attachment with the decedent’s name and identifying info in case they get separated.

Step 10: Submit the Return to the IRS (Mailing Address and Tips)

Once everything is prepared and signed, it’s time to file the return. As of the latest IRS instructions, Form 706-NA must be filed by mail (there’s no e-filing for estate tax returns).

• Mailing address: The IRS address can be found in the instructions. It is typically: Department of the Treasury Internal Revenue Service Center Kansas City, MO 64999 U.S.A. (This is for regular mail. If using a courier like DHL/FedEx, there’s a street address: e.g., 333 W. Pershing Rd., Kansas City, MO 64108, but check current instructions for any updates.)
• Timing: Make sure the envelope is postmarked by the due date (including extension if applicable). If you’re close to deadline and international mail is slow, consider using an express courier or trackable delivery service. Keep proof of sending.
• Payment enclosure: If paying by check (drawn on a U.S. bank or U.S. funds), make it payable to “United States Treasury”. Include the decedent’s name, “Form 706-NA”, and date of death on the memo. Do not staple the check to the form; just paperclip it. If paying by wire, the IRS instructions provide routing details – you won’t “enclose” anything but you may include a note that “Payment of $X sent via wire on [date]”.
• Secure packaging: Because you have original documents (or certified copies) like a death certificate or will, use a sturdy envelope. You may request them back, but generally IRS keeps them (so send copies unless certified is specifically required).
• Retain copies: Keep a complete copy of everything you send for your records. It might be many pages, but having that copy is vital in case of queries or if you need to reference later (like to fill Form 8971 or state filings).
• Acknowledgment: The IRS doesn’t usually send an immediate receipt. Eventually, if all is well, you will either get an estate tax closing letter (if you request one for a fee) or you can obtain a tax transcript showing the form was processed. Since 2021, estate closing letters are only issued if requested (with a fee); otherwise, an account transcript serves as evidence of closing.
• Follow up on transfer certificate: If a transfer certificate is needed urgently (say to sell stock or property), you might consider enclosing a cover letter highlighting that and perhaps faxing the form to the IRS’s Estate & Gift department after mailing (some guidance suggests faxing a copy of the filed return to a certain number to initiate the transfer certificate request – check IRS’s website for “Transfer Certificate filing requirements for estates of nonresidents” for details). Generally, the transfer certificate will be issued after the IRS reviews and is satisfied that either the tax was paid or no tax was due. Be patient: it often takes many months (12-18 months is not unusual) to get the certificate, due to IRS backlogs.

Finally, once mailed, mark your calendar to eventually verify that the IRS received and processed it. If you don’t hear anything after, say, 6-9 months, you (or your representative) can call the IRS Estate Tax department to check status, especially if a transfer certificate is pending.

---

With the form filed, the main compliance part is done. Next, we’ll illustrate how this all plays out with some examples, and then discuss state-specific issues, common mistakes, and more.

Form 706-NA in Action: 3 Real-World Example Scenarios

To solidify the concepts, let’s look at a few example scenarios of nonresident estates and how Form 706-NA would apply. These examples will show different outcomes: one where no filing is needed, one with a taxable U.S. estate, and one involving treaty benefits and a spouse.

Scenario	Explanation and Outcome
1. Small Estate Below $60,000 – No Filing Required Decedent: A Japanese citizen living in Japan. U.S. Assets: $50,000 in a U.S. bank account. Other Assets: $300,000 in Japanese stocks and home in Japan.	Analysis: The only U.S. asset is a bank deposit of $50k. Bank accounts are exempt from U.S. estate tax and the total U.S. assets are under $60,000. No Form 706-NA needs to be filed. The bank may release funds upon seeing the death certificate and possibly proof that assets were under threshold. (If the bank required a transfer certificate, the executor could send a letter to IRS with asset details to request one, but typically under $60k, a certificate isn’t issued as no tax filing was required.)
2. Taxable U.S. Estate – Form 706-NA with Tax Due Decedent: A German resident (not a U.S. citizen). U.S. Assets: A California rental property worth $800,000; no U.S. stocks. Debts: $200,000 mortgage on the property. Worldwide Assets: ~$2 million total (including the U.S. assets). Heirs: Two adult children (German residents).	Analysis: U.S. assets ($800k property) exceed $60k, so Form 706-NA must be filed. On Schedule A, list the CA property at $800,000. On Schedule B, deduct the $200,000 mortgage (likely fully deductible as it’s tied to the property) and, say, $20,000 of prorated expenses. Taxable U.S. estate ~ $580,000. Tentative estate tax on $580k would be computed (approx ~$185k). Subtract $13k credit (exempt $60k), leaving roughly $172k estate tax due. Result: ~$172,000 tax payable. No treaty in this scenario (Germany has no U.S. estate tax treaty). The executor files 706-NA, pays the $172k to IRS by 9 months. The IRS will later issue a transfer certificate allowing the children to retitle or sell the property. The estate’s personal representative also likely has to go through California probate to formally transfer the house to the heirs (state process).
3. Treaty and Spousal Relief – Minimize/No Tax Decedent: A UK citizen domiciled in England. U.S. Assets: $500,000 in U.S. stocks (various NYSE companies). Other Assets: $4.5 million in UK (house, investments). Total worldwide ~$5 million. Heir: Surviving spouse (UK citizen, not a US citizen).	Analysis: The U.S. stocks ($500k) trigger Form 706-NA filing. But the US-UK estate tax treaty applies. Under the treaty, the estate can claim a proportionate unified credit equal to the fraction of U.S. assets to worldwide assets. Here that ratio is $500k/$5M = 10%. A full U.S. citizen’s exemption is ~$12.92M (2023), and 10% of that is ~$1.292M. So effectively the estate can exempt $1.292M of U.S. assets – which fully covers the $500k (so no U.S. estate tax due). The executor will still file Form 706-NA to report the assets and claim the treaty benefit. They attach a statement citing the treaty and showing the calculation. Additionally, since the entire estate goes to the spouse, the treaty (and the code via QDOT) has marital provisions. Normally, no marital deduction since spouse isn’t U.S. citizen, but the UK treaty actually allows a marital deduction for transfers to a UK-domiciled spouse up to a certain amount. Even without that, the treaty credit already zeroed out tax. Result: $0 tax due after treaty credit. Form 706-NA filed with treaty disclosure. A QDOT wasn’t needed due to the treaty benefit, but if no treaty, the executor could have set up a QDOT for the $500k to defer tax (given no treaty, tax would have been ~$147k without a QDOT). The U.S. brokerage will require the IRS transfer certificate; the IRS will issue it once they agree no tax due (likely still many months later, but eventually).

These scenarios demonstrate how outcomes can vary widely: some estates owe nothing, while others face significant tax bills. Treaty countries get a better deal, and planning (like using a QDOT for a spouse, or not concentrating too much in U.S. assets) can save taxes.

Federal vs. State Estate Tax: Navigating U.S. and State Laws

Federal law (IRS and Form 706-NA) is just one layer. If a nonresident owned assets in a particular U.S. state, state estate or inheritance taxes and local probate laws may also come into play. It’s important to distinguish federal vs. state and know how each affects the estate.

Federal Estate Tax (Form 706-NA) Recap

• Jurisdiction: Applies to U.S.-situated assets anywhere in the United States. It’s a nationwide tax handled by the IRS.
• Rate and Threshold: Top rate 40%, threshold $60k for nonresidents (unless increased by treaty). Applies uniformly regardless of which state the assets are in.
• Purpose: Must be addressed to obtain the transfer certificate releasing assets and to settle the decedent’s obligations to the U.S. government.
• Probate relation: Federal tax is due whether or not formal probate is opened. It’s about the asset’s inclusion and value, not the legal transfer method. Even assets passing outside probate (like joint property, or accounts with beneficiary designations) are still subject to estate tax if they’re U.S. situs.

State Estate and Inheritance Taxes

Not all states impose an estate tax. In fact, most U.S. states do not have their own estate tax (they rely solely on the federal system). However, as of mid-2020s, about 12 states plus D.C. have an estate tax, and a few states have an inheritance tax (tax on the beneficiary receiving the asset). Notable state considerations:

• States with Estate Tax: e.g. New York, Washington, Massachusetts, Oregon, Illinois, Minnesota, New Jersey (inheritance tax now, estate tax repealed), Pennsylvania (inheritance tax), Maryland (both estate & inheritance), District of Columbia, etc. Each state sets its own exemption threshold and rates. For example, New York exempts around $6.58 million (2023 figure) for estates of nonresidents that include NY property, and taxes the amount above at rates up to 16%. Washington state taxes estates over about $2.2 million at rates up to 20% (including nonresidents’ Washington property).
• Which estates must file state returns? Generally, if a nonresident dies owning real estate or tangible personal property located in one of these states, and the value exceeds that state’s exemption, the estate must file a state estate tax return (and potentially pay state estate tax on that asset’s value). For instance, a French resident with a $3 million vacation home in Hawaii (Hawaii has an estate tax ~$5.5M exemption) might not need a Hawaii return if under threshold, but if it was in Washington state with $3M, a Washington estate tax return would be required and tax due on the amount above ~$2.2M.
• Real vs. Intangibles: Most states tax real estate and tangible property located in their state for nonresidents. However, intangible property (like stocks, bank accounts) is usually only taxed by the decedent’s state of domicile, not by the state where, say, a brokerage firm is located. That means if our nonresident had stock of a New York company, New York state wouldn’t tax that (the federal will). But if the nonresident owned a house in New York, then yes, New York estate tax may apply to that house’s value.
• Example: A Canadian dies owning a ski chalet in Vermont worth $2 million. Vermont has an estate tax (exemption $5 million). Since $2M < $5M, no Vermont estate tax or filing is needed (but federal 706-NA is because >$60k). If that property were in Maine, which has a lower exemption ($5.6M in 2023) also would be under. If in Oregon (exemption only $1M), then yes, an Oregon estate tax return and tax on $1M excess would be due (~10% of the amount above $1M).
• Inheritance Tax States: States like Pennsylvania and Nebraska have inheritance taxes which tax the beneficiary on the transfer. If a nonresident owned Pennsylvania real estate, that real estate passing to say a child would incur PA inheritance tax (4.5% for children, as of current rates). The estate’s executor typically has to pay that from the estate or the heir has to pay to the state. New Jersey imposes inheritance tax if assets pass to certain non-exempt beneficiaries (e.g., nieces/nephews), and yes, a nonresident’s NJ real property can trigger it.
• No Estate Tax States: Many states (like Florida, Texas, California, etc.) have no state estate tax. If a foreigner owned a home in Florida, there’s no Florida estate tax to worry about – only the federal. This is good to know for estate planning: owning property in a no-estate-tax state avoids an extra layer of tax.

Probate and legal process differences:

• If a nonresident dies owning real estate in a U.S. state, typically an ancillary probate in that state is needed to legally transfer the property to heirs or a buyer. Each state has its own procedure. Some, like Florida, require an attorney for probate. Some allow a simplified process if property is below a certain value.
• Probate vs. Tax: Even if no state estate tax due (because value under threshold or state has none), probate might still be required to clear title. Conversely, state tax might be due even if no probate (if the property was in a revocable trust avoiding probate, state still wants its tax).
• Community Property States: In a few states (like California, Nevada, Arizona, etc.), if a decedent was married and the property was community property with a surviving spouse, only the decedent’s half is in the estate. But since our scenario is nonresident, they typically wouldn’t be part of a U.S. community property regime unless perhaps they were domiciled there. Unlikely, but something to note if an expat lived in a community property state at death.
• State tax clearance: Similar to the IRS transfer certificate, some states require a tax waiver or proof taxes are settled to transfer assets. E.g., New Jersey historically required an inheritance tax waiver before a bank can release funds of a decedent. If you encounter state estate/inheritance taxes, check if you need to obtain a release letter from the state.

Bottom line: Always check the specific states where the decedent’s assets are located:

• Does that state have an estate or inheritance tax?
• What’s the threshold and do we exceed it?
• If yes, file the appropriate state estate tax return (usually due around 9 months too, many follow similar timing, some allow extension aligned with federal if requested).
• Pay any state tax due, and obtain any state tax clearance needed to transfer the property.
• Handle probate or legal title transfer in that state.

For example, if our German decedent in Scenario 2 owned the California property: California has no estate tax, but the property will need a California probate unless held jointly or in a trust. For our Canadian with a Florida condo: Florida no estate tax, but a Florida ancillary probate needed (unless property titled in a way to avoid it, like joint tenancy or trust).

One more nuance: some states impose property transfer taxes if you try to retitle real estate from a decedent to heirs; usually exempt for inheritance but always check local county rules.

State and federal interaction: State estate taxes paid can be deducted on the federal Form 706-NA (as a debt/expense of the estate). This won’t reduce the federal estate below $60k threshold though; it only helps if you already have a taxable federal estate. Also, if a treaty applies, it might credit foreign (state) taxes as well.

In summary, address federal obligations first (to get the IRS off your back and unfreeze assets), then ensure state requirements are not overlooked. Ignoring state estate taxes where applicable can result in liens on the property or delays in selling/transferring it.

Common Mistakes to Avoid When Filing Form 706-NA

Even seasoned professionals can stumble with Form 706-NA because of its unique rules. Here are some common mistakes and pitfalls to avoid:

• Failing to File When Required: The number one error is not realizing a return is needed at all. Executors sometimes think “$60,000 is so low, surely that doesn’t apply” – but it does. Always check U.S. assets value. If above $60k, file the return (even if you suspect no tax due due to a treaty or deductions).
• Missing the Deadline: Nine months can fly by, especially if dealing with cross-border complexities. Missing the filing deadline without an extension leads to late filing penalties. Similarly, not paying the estimated tax by nine months triggers interest and late payment penalties. Solution: Mark that 9-month date, and if you’re not ready, send in Form 4768 for an extension, and pay at least a good-faith estimate of any tax.
• Incorrect Asset Valuations: Under or over-valuing assets can cause problems. Underestimate property values and you’ll underpay tax (and potentially face penalties when the IRS corrects it). Overestimate and you pay too much or create needless hassle. Use qualified appraisals and the proper valuation methods for securities (e.g., average of high/low price for stocks on date of death, or alternate valuation if elected).
• Forgetting to Convert Currency: All amounts on 706-NA must be in U.S. dollars. Executors sometimes list property values in foreign currency by mistake. This will confuse processing. Always convert to USD (and it’s good practice to note the exchange rate used in an attachment).
• Including Non-U.S. Assets on Schedules: Only U.S.-sitused assets go on Schedule A. We’ve seen people list the decedent’s foreign home or overseas bank accounts – those do not belong on the U.S. return (unless needed for a treaty calculation, and if so, they go in a supplemental statement, not in the taxable estate calculation).
• Not Utilizing a Treaty or Misapplying It: If a treaty exists that can reduce tax, failing to claim it is a mistake that can cost dearly. On the flip side, invoking a treaty incorrectly (like claiming an exemption that the estate doesn’t actually qualify for) can lead to IRS rejecting part of your return. Treaties often require specific attachments – don’t forget to include the treaty disclosure and any required forms. When in doubt, consult an expert on that treaty.
• No QDOT for Non-Citizen Spouse: If the decedent left a large U.S. asset to a non-U.S. citizen spouse, not planning for a QDOT is a mistake in planning. In filing, at least consider electing QDOT if the spouse is going to set one up by the filing deadline. Otherwise, that spousal share gets taxed now. Many executors are unaware of this rule and assume spouse means no tax – not so without U.S. citizenship or a QDOT.
• Incomplete Attachments: The IRS may audit or question the return if documents are missing. Common omissions: forgetting to attach the will or death certificate, not providing translations, missing appraisals for big-ticket items. These can all delay processing (and your transfer certificate).
• Calculation Errors: Math mistakes in the tax computation can happen, especially doing the estate tax by hand. It’s safer to use the worksheet provided by IRS or tax software. Always double-check the math on Schedule A + B totals and the tax figure.
• Not Paying Attention to Jointly Owned Assets: For jointly owned U.S. property, by default the IRS might include the full value in the decedent’s estate unless you prove the surviving owner contributed to the purchase. A mistake is to automatically only include 50%. If, say, a foreign couple jointly owned U.S. real estate, and the funds came entirely from the decedent, the IRS expects 100% inclusion (since the joint ownership was essentially a convenience). Document contributions of co-owners to reduce includible value.
• Assuming No One Will Know if You Don’t File: Executors sometimes think, “The IRS won’t know about these U.S. stocks if we just transfer them quietly.” In reality, financial institutions will not release assets without IRS clearance. Also, brokerage firms report account holdings upon death to the IRS. There’s also a legal lien on U.S. situs assets for estate tax. So not filing isn’t a viable strategy – it will surface when you try to access the funds or sell the property.
• Ignoring the Transfer Certificate Process: Filing the form is step one, but if you need to actually get the money or property moved, don’t forget to follow through on requesting the transfer certificate (if not automatic). Some executors mail the form and then wonder months later why the bank still won’t release the account. The IRS must either issue a certificate or clear the account via a letter. Make sure you’ve provided the IRS Estate & Gift Tax office with a cover letter or fax informing that a transfer cert is needed and include account details.
• Not Considering State Taxes: We covered state nuance – a mistake is handling the federal and then discovering a year later that, say, Washington State or another jurisdiction is demanding an estate tax return or has a lien on the property. Always address any state filings concurrently.
• Lack of Professional Guidance in Complex Situations: Form 706-NA is complex, and if the estate involves high values, tax treaties, or special assets (like LLCs, trusts, etc.), going it alone can lead to errors. Not consulting a U.S. estate tax attorney or CPA for a large estate is a risky move. The cost of mistakes in this arena (penalties, overpaid tax, or legal troubles) often outweighs the professional fees. While simple cases (like one bank account just over $60k) might be handled by a diligent executor, anything substantial or tricky should get expert review.

By being mindful of these common pitfalls, you can file a more accurate and trouble-free return. When in doubt, read the IRS instructions (they are detailed for Form 706-NA) and consider reaching out to the IRS help line or a tax professional with international estate experience.

Pros and Cons: Filing Form 706-NA Yourself vs. Hiring a Professional

Filing an IRS estate tax return for a nonresident decedent is no small task. Some executors consider doing it themselves, while others turn to professionals (tax attorneys, CPAs, or enrolled agents). Here’s a quick comparison of the pros and cons of DIY vs. Professional Assistance in preparing Form 706-NA:

Approach	Pros	Cons
Do-It-Yourself Filing (Executor prepares the form)	– Cost Savings: Avoid professional fees, which can be significant for cross-border estate tax work. – Direct Control: You’ll intimately understand the estate’s details and maintain full control of the process. – Learning Experience: You’ll gain knowledge about international estate tax (useful for personal growth or similar future situations).	– Complexity & Risk of Error: U.S. estate tax law is complex. A non-expert might miss deductions, treaty benefits, or make calculation errors, leading to overpayment or IRS penalties for underpayment. – Time-Consuming: Researching rules, completing forms, and correspondence with IRS can take dozens of hours, especially if unfamiliar with terminology. – Stress: The executor already has many duties; handling complicated tax filings can add stress during a period of grief.
Hire a Professional (U.S. tax attorney or CPA)	– Expertise: Professionals know the ins and outs – ensuring correct asset inclusion, valuations, maximizing deductions/treaty relief, and proper attachments. – Efficiency: They can complete forms faster and navigate IRS communication if issues arise. – Peace of Mind: Reduces worry about “did I do this right?” – you have someone to advise on decisions (e.g., QDOT, alternate valuation) and handle follow-ups like the transfer certificate.	– Cost: Hiring experts is expensive. Fees can range from a few thousand dollars for simple estates to tens of thousands for complex ones. The estate must bear this cost. – Finding the Right Expert: International estate tax is a niche field; not every CPA or lawyer is experienced with Form 706-NA. It might take effort to find a qualified professional, possibly in the U.S. – Still Need to Gather Info: Even with help, the executor must compile documents, valuations, and details for the professional – you can’t fully outsource the legwork of collecting data.

In many cases, hiring a professional is advisable, particularly if the estate is large, tax is likely due, or treaty application is involved. The professional fee can be seen as an investment to avoid costly errors or oversights. However, for a relatively small estate just over $60k with straightforward assets, a diligent executor armed with IRS instructions might successfully DIY. A middle-ground option is to prepare a draft yourself and then pay a professional just to review and consult, which can save cost but still get expert eyes on the return.

Ultimately, weigh the estate’s complexity and your own comfort with tax forms. Remember that as executor, you’re personally responsible for the return’s accuracy – so choose the approach that lets you file confidently and correctly.

Key Terms and Concepts Glossary

Understanding the terminology around Form 706-NA is half the battle. Here’s a quick glossary of key terms used in this context:

• Nonresident Not a Citizen (NRNC): A decedent who was neither a U.S. citizen nor domiciled in the U.S. at death. Form 706-NA is specifically for such individuals.
• Domicile: The individual’s permanent home. Determines if they are considered a U.S. resident for estate tax. (Contrast with income tax “residency” which uses days present – estate tax uses intent and permanence.)
• U.S.-Sitused Assets: Property considered located in the U.S. for estate tax (e.g., U.S. real estate, U.S. stocks). Only these go on Form 706-NA.
• Gross Estate: The total value of all assets that the decedent owned that are subject to estate tax. For Form 706-NA, it means total U.S.-sitused assets (before deductions).
• Taxable Estate: Gross estate minus allowable deductions. The amount on which tax is computed.
• Unified Credit (Applicable Credit): A dollar amount credit against estate tax. For nonresidents it’s $13,000 (unless increased by treaty), which covers tax on $60,000 of assets.
• Estate Tax Treaty: An agreement between the U.S. and another country that modifies estate tax rules, often giving a larger exemption or relief from double taxation.
• Qualified Domestic Trust (QDOT): A special trust for a non-citizen surviving spouse to receive assets from the decedent and defer U.S. estate tax. The QDOT ensures the IRS can collect tax later from the trust when distributions or certain events occur.
• Marital Deduction: A deduction for assets passing to a surviving spouse. Unlimited if the spouse is a U.S. citizen. Zero unless in QDOT if spouse is not a citizen.
• Generation-Skipping Transfer (GST): A transfer (during life or at death) to someone two or more generations below the decedent (e.g., grandchild). Subject to a separate 40% tax on top of estate tax, but with its own exemption equal to the normal exemption for U.S. persons (approx $12 million). Nonresidents typically only worry about GST if they have U.S. trust arrangements spanning generations.
• Executor: The person (or institution) tasked with administering the estate and filing tax returns. If no executor is formally appointed for a nonresident, whoever has charge of the U.S. assets can act as one for Form 706-NA.
• Transfer Certificate: An IRS-issued document releasing U.S. assets for transfer. It certifies that the estate has paid or provided for estate tax. Without it, banks/brokers often freeze or won’t retitle assets owned by a nonresident decedent.
• Form 4768: The form to request an extension of time to file Form 706-NA (and/or to pay tax). Grants up to 6 extra months to file, and possibly an extension to pay for reasonable cause (the latter isn’t automatic).
• Form 2848: Power of Attorney form, if you want to authorize someone to represent the estate before the IRS.
• Form 8971: A form used to report the final value of assets to the IRS and beneficiaries (basis reporting) after an estate tax return is filed. Required for estates that needed to file a 706 or 706-NA, with some exceptions.
• Adjusted Taxable Gifts: Taxable gifts made by the decedent after 1976 that aren’t included in the gross estate (because given away prior). For nonresidents, only gifts of U.S. tangible or real property would have been taxable gifts. These matter because they use up part of the unified credit. This is a niche factor; if decedent had made large taxable gifts of U.S. property, it would reduce the credit available at death.
• Estate Tax Closing Letter: A letter from the IRS confirming acceptance of the return and stating the exam is complete (if any). As of recent changes, you must request this and pay a small fee, or rely on transcripts.
• Ancillary Probate: A secondary probate proceeding in a state where the decedent owned property, when the main probate is in another jurisdiction (often another country). Required to handle local assets.

Keep this glossary handy if you encounter unfamiliar terms while preparing the form or reading IRS materials.

(Now, to wrap up, we address some frequently asked questions that often arise with Form 706-NA and related situations.)

Frequently Asked Questions (FAQs)

Q: Do I need to file Form 706-NA if my nonresident father’s U.S. assets were under $60,000?
A: No. If the total U.S.-situated assets are $60,000 or less, a 706-NA return is not required for a nonresident estate.

Q: Does a non-U.S. citizen’s estate really only get a $60,000 exemption (vs. millions for U.S. citizens)?
A: Yes. By default, nonresidents only have a $60,000 U.S. estate tax exemption. Only an estate tax treaty can increase that amount.

Q: Should I list the decedent’s foreign assets on Form 706-NA?
A: No. Do not list non-U.S. assets on the form’s schedules. Only U.S.-sitused assets are reported, though you might note foreign assets separately for treaty calculations.

Q: Can I include a non-U.S. bank account on the return for deduction or other purposes?
A: No. Foreign bank accounts are neither taxed nor needed on this form. Only U.S. bank accounts would be listed if not exempt (most are exempt if just deposits).

Q: My spouse is not a U.S. citizen – if I die with U.S. assets, will the marital deduction apply?
A: No, not outright. Transfers to a non-citizen spouse don’t qualify for the unlimited marital deduction unless the assets go into a QDOT trust.

Q: If a decedent was a U.S. green card holder living abroad at death, do we file 706 or 706-NA?
A: Yes, file the regular Form 706. A green card holder is generally considered U.S. domiciled unless they formally abandoned residency, so the estate is taxed like a U.S. resident.

Q: Is U.S. life insurance on a nonresident’s life subject to U.S. estate tax?
A: No. Life insurance death benefits are exempt from estate tax, so they aren’t counted on Form 706-NA.

Q: Do I need to convert values to USD?
A: Yes. All asset values and expenses must be reported in U.S. dollars, using the exchange rate on the date of death for any valuations done in foreign currency.

Q: Can Form 706-NA be filed electronically or by fax?
A: No. It must be paper-filed by mail (though you may fax a copy to request a transfer certificate after filing).

Q: Will the IRS automatically issue the transfer certificate after I file?
A: No, not automatically. You usually have to request it (often by including a cover letter or following up with the IRS). It can take many months for the IRS to issue it.

Q: If no tax is due, why does it take so long to get the transfer certificate?
A: Yes, unfortunately even a no-tax case can take a year or more. The IRS reviews the return and processes clearance in queue; understaffing causes delays.

Q: Do states like New York or California require a separate estate tax filing for nonresidents?
A: Yes, if the nonresident owned real or tangible property in a state with an estate tax (like NY), and it exceeds that state’s exemption, a state estate tax return must be filed.

Q: The broker froze a nonresident decedent’s U.S. investment account. Is filing 706-NA the only way to unfreeze it?
A: Yes. In most cases, the IRS estate tax clearance (via 706-NA and transfer certificate) is needed before brokers or banks release substantial U.S. assets of a foreign decedent.

Q: What happens if I just don’t file Form 706-NA even though it’s required?
A: No, that’s not a good idea. The IRS can assess penalties, and U.S. assets are effectively stuck (due to the estate tax lien and financial institutions’ requirements) until you comply.

Q: The decedent made large gifts of U.S. stock before death – do these affect the estate tax?
A: No, gifts of intangibles by a nonresident are generally not subject to U.S. gift tax and don’t count against the $60k. Only taxable lifetime gifts of U.S. tangible property would reduce the remaining exemption.

Q: Does an estate tax treaty mean I don’t have to file at all?
A: No. You still file Form 706-NA if U.S. assets exceed $60k, but you will claim the treaty benefits on the return (potentially resulting in no tax due).

Q: If the nonresident had U.S. estate tax taken from an IRA distribution after death, can we recover it by filing?
A: Yes. Sometimes, payers withhold 40% on U.S. retirement accounts. Filing 706-NA will allow the proper tax to be computed (maybe less than withheld) and you can claim a refund for any overpayment.

Q: Does a Puerto Rico resident file Form 706-NA?
A: Yes. U.S. citizens who solely resided in U.S. territories (like Puerto Rico) are treated as nonresidents for U.S. estate tax, so Form 706-NA would be used for their U.S. assets.

Q: Can I get an extension to pay the estate tax if assets are illiquid?
A: Yes, you can request an extension to pay (on Form 4768 or via separate letter) for reasonable cause, or elect to pay in installments if criteria met (usually for closely held business assets). Interest will still accrue, but it can prevent penalties.