Why Estate Planning?
GE-28533 (Revised 04/04) (Exp. 04/06)

Effective estate planning focuses on helping to protect assets and ensuring that they are passed to your heirs as you wish. With recent changes in federal estate tax laws, estate planning has become more complicated so there are even more reasons to plan for the future. Proper estate planning can help you:
· Increase the amount of wealth transferred to beneficiaries
· Avoid forced liquidation of assets
· Distribute estate assets as you choose
· Maintain control of assets while you are alive

Estate planning under the revised federal tax laws:
Under the Economic Growth and Tax Relief Reconciliation Act of 2001, numerous changes to federal estate and gift taxes took effect and are scheduled to remain in effect through 2010. These include a gradual reduction in estate tax rates and repeal of the estate tax for the year 2010. In 2011, however, federal estate taxes would be reinstated, with a maximum rate of 55%, if Congress does not take additional action.

As it is not known whether the provisions of the 2001 law will remain in effect, it is still necessary to understand the provisions of prior, as well as current federal estate tax law. Note that estate taxes for the various states must also be considered in estate planning. The information that follows is a very brief summary of some federal estate tax provisions. You should consult your own attorney, tax advisor, or qualified estate planner to discuss your specific situation.

Federal estate tax exemptions and credits:
The total value of all assets that are includible in your estate are added together at your death to determine the federal estate tax liability. The taxable estate includes all includible assets owned at death, as well as certain properties that were transferred as gifts during an individual’s lifetime. The principal exception is for qualifying gifts of up to $11,000 per recipient, per year. Property passing to qualified charities or transferred between a married couple, during their lifetimes or at the death of one spouse, are also exempt from estate and gift taxes.

Under current law, the estate taxes due on the first $1.5 million (per individual in 2004–2005) of assets are eliminated. This estate-tax exempt amount is scheduled to rise to $3.5 million in 2009*. Note that under current law, the gift tax will continue in effect in 2010 and after, even if the estate tax does not.

The Marital Deduction
Under the marital deduction, assets may be transferred free of federal estate or gift taxes between spouses, if both are U.S. citizens. The marital deduction allows married couples to avoid federal estate taxes on the death of the first spouse. However, for large estates, it may be preferable to avoid using the full marital deduction in order to reduce the tax on the estate of the surviving spouse.

For example, a husband and wife have an estate worth $3,000,000. (Each spouse has an estate of $1,500,000). If the husband leaves his entire estate to his wife, no federal estate tax is incurred. But when the wife dies, her estate would be worth $3,000,000 (no estate growth is assumed for simplification of the example) of which $1,500,000 is exempt in 2004 and 2005. Her heirs will have to pay estate taxes on the remaining $1.5 million.

The goal of estate planning is to help control the distribution of property as well as to reduce the estate taxes due. This example clearly shows how estate taxes could have a considerable affect on a married couple who’d like to transfer their assets to their heirs with the least amount lost to Federal taxation.

To learn more about efficient strategies to help ensure that your estate is passed to beneficiaries as you wish, contact a financial professional who focuses on estate planning. Getting started today will help you take the steps needed to protect your hard-earned assets in the future.

AXA Advisors, LLC does not provide legal or tax advice. Please consult your tax or legal advisor regarding your individual situation.

*Estate tax rules are schedule to expire on December 31, 2010 unless extended by Congress.