Form 706-NA - United States Estate Tax Return
Form 706-NA: United States Estate Tax Return for Nonresident Aliens
Form 706-NA is the federal estate tax return specifically used to report and determine the U.S. estate and generation-skipping transfer (GST) tax liability of nonresident aliens—that is, individuals who were neither U.S. citizens nor domiciled in the United States at the time of their death, but who held U.S.-situated assets.
This form allows the Internal Revenue Service (IRS) to assess whether an estate owes tax on these U.S.-based holdings and ensures compliance with applicable U.S. tax law even when the decedent was not a U.S. resident.
Defining a Nonresident Alien Decedent
For estate tax purposes, a nonresident alien decedent is someone who, at the time of their death:
Was not a U.S. citizen, and
Was not considered domiciled in the United States.
It is important to note that a person domiciled in a U.S. territory or possession—such as Puerto Rico or Guam—is not considered a U.S. citizen for purposes of this return.
Domicile, while not strictly defined by a single factor, generally refers to the location the decedent intended to remain in permanently. Factors such as the decedent’s residency history, location of family, and center of financial interests are often considered when determining domicile.
Filing Obligation and Threshold
Who Must File Form 706-NA?
The obligation to file Form 706-NA arises when the value of a nonresident alien’s U.S. situated assets at the time of death exceeds $60,000. This total includes:
The gross value of U.S. property owned at death,
Certain gifts made during the decedent's lifetime, and
Any applicable gift tax-specific exemption amounts.
The individual responsible for administering the estate—commonly referred to as the executor—is required to submit the form. In the absence of a formally appointed executor, any party in actual or constructive possession of the decedent’s U.S. property is expected to file.
When and How to File
The estate must file Form 706-NA within nine months of the decedent’s death. If more time is needed to prepare and submit the return, the executor may request a six-month extension using Form 4768 (Application for Extension of Time to File a Return and/or Pay U.S. Estate Taxes).
When filing Form 4768, it's essential to check the box for Form 706-NA in Part II to ensure the extension is applied to the correct filing.
It is important to understand that while an extension may be granted for filing the return, it does not automatically extend the time to pay any estate tax due. Late payments may still incur interest and penalties unless a separate request is submitted and approved.
Required Documentation and Attachments
Several supporting documents must accompany Form 706-NA to validate the information reported and help the IRS verify the estate’s tax obligations.
If the decedent died with a will, a certified copy of the will should be included. If a certified copy cannot be obtained, an ordinary copy may be submitted, provided a written explanation accompanies it detailing the reasons the certified copy was unavailable.
In all cases, a copy of the decedent’s death certificate must also be attached.
Other relevant documents may be required depending on the complexity of the estate, such as evidence of property ownership, appraisals of U.S.-based assets, and documentation of any liabilities or deductions claimed.
Completing Form 706-NA
The form is structured into multiple sections, each requiring specific information about the estate and decedent.
In Part I, the executor must enter the decedent’s personal details, including their full name and country of citizenship. If the decedent had a Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN), it should be provided in the space designated on Line 2. However, if no SSN or ITIN exists, the IRS will assign a unique Internal Revenue Service Number (IRSN) to identify the decedent for estate tax purposes.
Calculating the Estate Tax
The U.S. estate tax is applied only to assets situated within the United States. These typically include:
Real estate located in the U.S.
Tangible personal property (e.g., artwork, jewelry) located in the U.S.
Certain stocks and securities issued by U.S. corporations.
To determine the taxable estate:
Report the total value of U.S.-situated assets on Schedule A of the form.
Subtract allowable deductions to arrive at the net taxable estate, which is entered on Schedule B.
Use Part II of Form 706-NA to calculate the estate tax due, taking into account the unified credit available to nonresident aliens.
It is worth noting that nonresident aliens are only entitled to a limited unified credit—substantially lower than the credit available to U.S. citizens and residents. This credit effectively shelters only the first $60,000 of U.S. assets from estate tax liability, although tax treaties between the U.S. and certain countries may increase this threshold or offer additional relief.
The Role of Tax Treaties
The United States maintains estate and gift tax treaties with a limited number of countries. These treaties may allow for:
A higher exemption threshold,
Credits for foreign death taxes,
Broader definitions of allowable deductions, or
Provisions to avoid double taxation on cross-border estates.
If a tax treaty applies to the decedent’s country of residence, the executor may invoke treaty provisions on Form 706-NA. In some cases, additional documentation may be required to substantiate treaty claims.
Final Thoughts
Filing Form 706-NA is a critical obligation for the estate of a nonresident alien who held U.S.-situated property at the time of death. Navigating this process correctly ensures compliance with U.S. tax law and prevents penalties for failure to file or underpayment.
Given the complexity of U.S. estate tax rules—especially for nonresidents—it is highly advisable for executors to consult a qualified international tax professional or estate attorney familiar with cross-border matters. Doing so can ensure the accurate valuation of estate assets, proper use of deductions and exemptions, and compliance with any applicable treaty provisions.
If you have questions about whether you must file Form 706-NA or need assistance preparing the form, professional guidance can provide peace of mind during a difficult and often administratively burdensome time.
