File Form 706 after first spouse's death

The surviving spouse should file a Form 706 for the first spouse to die. This enables the estate tax deduction (currently over $10 million) to be applied to the first spouse’s estate. Any remaining estate tax deduction can then be added to the surviving spouse’s estate tax deduction.


Spouse #1 has an estate of $5 million.

Spouse #2 has an estate of $9 million.

If Spouse #1 dies and a Form 706 is not filed, the estate passes tax-free to Spouse # 2. Then Spouse #2 has an estate of $14 million of which $4 million is subject to 40% estate tax on her death = $1.6 million tax.

If Spouse #1 dies and a Form 706 is filed, the estate tax deduction means that there is no estate tax. Now $10 M minus $5 M = $5 M can be added to Spouse #2’s estate tax deduction = $15 million. Since this is more than Spouse #2’s estate, NO estate tax will be owed when Spouse #2 dies.

Needless to say, a record of this should be provided to Spouse #2’s executor.

Wendy (cross-posted on Estate Planning Board)


From Investopedia…

Form 706 must be filed on behalf of a deceased U.S. citizen or resident whose gross estate, adjusted taxable gifts, and specific exemptions exceed $12.06 million in 2022 (adjusted to $12.92 million in 2023, to account for inflation).

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Correct. Those who die with more than the threshold in assets MUST have an estate tax return filed on their behalf, because some tax will be owed.

But as Wendy correctly points out, there can be benefits to filing an estate tax return when it is not required.



This brings up an interesting question. If spouse 1 dies, files estate tax forms, and “carries over” $5M deduction, but then a few years later tax law changes, perhaps with only a $3M deduction, does spouse 2 still have that excess $5M deduction from spouse 1 (who died under old tax law)?