Determine if you should be concerned about the impact of Federal Estate Taxes on your assets. One of the greatest mistakes that clients make in estate planning is to confuse the need to set up a Living Trust to avoid probate costs -- regardless of the size of their estate -- even as low as $100,000, or less -- and the need to plan for Federal Estate Taxes once their estate is estimated to exceed the Federal Estate Tax exemption. Remember, whether your estate is over or under the Federal Estate Tax exemption has nothing to do with Probate and the need to set up a Living Trust. Federal Estate Taxes are based on the Net Value of your Taxable Estate (after deduction for expenses, debts and taxes). Deductible expenses, debts and taxes may include funeral expenses, estate administration expenses, creditor claims against the estate and unpaid mortgages. Without proper planning, for a married couple, the Federal Estate Tax is normally due after the death of the surviving spouse and is based on the combined Net Value of the couple's total Taxable Estate. The following examples assume that the person dies in 2003.

Taxable Estate Federal Estate Tax $1,000,000 $0 $1,500,000 $210,000 $2,000,000 $435,000 $4,000,000 $1,415,000 $10,000,000 $4,355,000 * The Economic Growth and Tax Relief Reconciliation Act of 2001 ("the Act") modifies the Federal Estate Tax Exemption Amount as follows: the Exemption Amount increases from $1,000,000 per person for individuals dying in 2003 to $1,500,000 in 2004, $2,000,000 in 2006 and $3,500,000 in 2009; the Exemption Amount does not apply for 2010 when the Federal Estate Tax is repealed; the Federal Estate Tax is reinstated for 2011 and later years and the Exemption Amount is reinstated for 2011 and later years in the amount of $1,000,000 (unless subsequently modified or repealed). ** The Act modifies the highest marginal Federal Estate Tax rate as follows: 49% for 2003, 48% for 2004, 47% for 2005, 46% for 2006, 45% for 2007, 2008 and 2009, repealed for 2010 and reinstated to 55% for 2011 and later years (unless subsequently modified or repealed).

Go to Basic Estate Plan to see what you should look for in a complete basic Estate Plan. Estate Planning is much more than having a Will or Living Trust.