Do we file Form 706 if the estate is below the filing threshold?
Not automatically, but there is a common reason to file anyway. Executors of US citizen and resident estates above the filing threshold have to file, and estates below it may still file in order to make a portability election, which exists only on a filed return. So the question is not simply whether the estate is over the line. It is also whether the surviving spouse's position depends on something that can only be preserved by filing now. Work out the worldwide estate first, because for a citizen or resident the base includes assets wherever they are situated, and an estate that looks small in one country can be a different size once everything is counted.
Does a US citizen who died in Canada need Form 706?
Citizenship is what puts the estate in scope, not where the person was living when they died. The estate of a US citizen is measured on worldwide assets, so a life spent outside the United States does not narrow the base — it widens the work, because the assets have to be valued in several currencies and reconciled with foreign probate and any death taxes paid elsewhere before anything can be distributed. Whether the return is required then depends on the size of that worldwide estate against the filing threshold, and on whether a portability election is wanted. Start from a complete inventory rather than the US-situated part of it.
Do we file Form 706 only to claim portability for a surviving spouse?
That is a recognised reason to file an estate return, and for many estates it is the only reason. The election is made on the return, so an estate that files nothing makes no election. The decision is about the surviving spouse's later position rather than the tax on this death, which is why it is easy to postpone and then lose. Two practical points. The inventory still has to be complete, because an election made on a return with gaps is only as good as the return. And the decision is far easier taken while the executor is still gathering records than years afterwards, once they have been dispersed.
Are assets outside the United States included on Form 706?
Yes. For a citizen or resident estate the base is worldwide, so foreign bank accounts, foreign property, foreign pensions and shares in foreign companies all belong in the inventory. That is the single biggest difference between this return and the one filed for a non-resident estate, which looks only at property situated in the United States. In practice it means three extra pieces of work: valuing assets under local practice, converting them on a stated basis, and reconciling the result with whatever a foreign probate process has recorded for the same assets. Where the two schedules disagree, somebody will eventually ask why, so document the reason at the time.
Can foreign death taxes paid abroad be claimed on Form 706?
The return is where foreign death taxes paid are brought into the picture, so evidence of them belongs with the estate papers from the start. The practical difficulty is not the principle but the proof: another country's assessment, receipt or clearance has to be obtained, translated where necessary, and tied to the same assets on the US schedule. Executors often have the tax paid but not the document showing what it was charged on. Ask for it while the foreign administration is still open. Once a foreign estate has been closed and distributed, obtaining a clean copy of what was assessed becomes a request rather than a right.
Who signs Form 706 for a US citizen who lived abroad?
The executor or personal representative of the estate signs and files it, and that is so whether the appointment came from a US court or a foreign one. A foreign grant of probate does not create a separate foreign filing route; it identifies who is acting. The person acting is also the only one who can assemble what the return needs, since the base is worldwide: the inventory, the valuations in each currency, the conversion basis, the foreign probate schedule and any foreign death taxes paid. Where two people are appointed in different countries, decide early which of them carries the US return, because duplicated inventories rarely agree.
Is the sale of foreign property taxable where I live?
For a resident, yes — worldwide gains are taxable, and the gain is computed in your own currency, so the exchange rate at purchase and at sale changes the number even when the local-currency price did not move. The country where the property sits usually taxes it too, often with a withholding or clearance step before closing, and that tax becomes a credit. A principal residence relief may apply to a home abroad on the same terms as one at home. See principal residence and foreign property.
Do I pay tax when I inherit property abroad?
The inheritance itself is often not income to you, but three other things can create tax: the estate may owe tax where the deceased or the property was situated, some countries tax the recipient directly, and the gain from the date you inherit to the date you sell is yours. Reporting obligations can also attach to holding the asset. See inheriting property abroad.
