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              TUTORIAL ON ESTATE TAXES

     Estate taxes are one of the most complicated areas of law in
the United States. Many millions of dollars are needlessly lost
to the government and not passed on to individual's heirs because
of a failure to use legal means to reduce or eliminate the tax.
At present, here are the raw basics. Please note that this
tutorial does not discuss state level estate taxes. Coverage
concerning the rates for these taxes is contained in the state
taxation tutorial.

     If your gross estate at the time of your death is less than
$ 600,000 then you owe no federal estate tax. The gross estate
includes life insurance proceeds. Under certain limited
circumstances life insurance trusts can be created which result
in the life insurance proceeds being excluded. 

     Married individuals can legally limit estate taxes in many
ways. For example, equalizing the size of their estates. If one
spouse has a $ 400,000 estate, the other $ 800,000, the result is
the unnecessary taxation of the larger estate. As a practical
matter if a married couple has $ 1.2 million in assets, if they
equalize their estates and use "credit shelter" arrangements in
their wills or trusts, there will be no estate tax.

     As we mentioned, the gross estate includes life insurance in
most cases. However, life insurance can be excluded from the
gross estate if you have a life insurance trust. These life
insurance trusts are very complicated and have a lot of rules and
exclusions attached to them. We are preparing a tutorial and form
for them.

     The most common means to eliminate or reduce estate taxes is
a lifetime gifting program. PRESENT LAW permits each person to
make gifts of $ 10,000 per person per year. Thus, if you are
married you and your wife can make gifts of $ 10,000 each to each
of your children or other persons who would be your estate
beneficiaries each year.

     If you have two children and are married, over a five year
period, you could both gift $ 50,000 each to the children. This
is a total exclusion from your estate tax of $ 100,000. By
carefully planning making lifetime gifts, many very sizable
estates can be reduced to the limits provided. Be sure to talk to
a CPA or tax lawyer about your planning needs if you might have a
gross estate that will hit the estate tax limits. We recommend
that if you have a current estate of $ 400,000 or more that you
assume that due to capital gains, etc., that your estate will
probably be over the limit, or could be pushed over the limit.