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               │  ESTATE PLANNING -- THE BASICS  │
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In the game of business, it's not how much you make, it's
how much you keep; and while it is true you "can't take it
with you" when you die, there are a number of simple and
relatively easy steps you can take during your lifetime
that will greatly increase the amount of your hard-earned
wealth that is passed on to your spouse and children, or
other heirs, keeping your fruits of your labor out of the
eager hands of the Internal Revenue Service, state taxing
authorities, and high-priced lawyers.

There are various techniques you can use which will enable
you to not only reduce death taxes (federal estate tax and
state inheritance or succession taxes), but may in some
cases also reduce state and federal income tax burdens, as
well as cutting out lawyers' and executors' hefty probate
fees at the time of your death.

The following discussion outlines some of the basic
strategies in estate planning, which will vary somewhat
depending upon the size of your estate.

PROBATE AVOIDANCE.  If your estate is under $600,000,
estate taxes (and in many states, state death taxes) will
usually not be a concern.  Nevertheless, it is quite
likely that your assets will be tied up in state probate
proceedings for a considerable period of time after your
death, which can often be exorbitantly expensive.  While
lawyers love probates, and the large fees they can earn,
your heirs will definitely not like the "shrinkage" that
inevitably occurs in your estate if it has to go through
the probate process.

Accordingly, there are major advantages to putting all of
your assets into a revocable inter vivos trust, also known
as a "living trust," which any competent estate attorney
can set up for you at relatively little cost.  If you do
so, you will have to be sure to take the steps of actually
transferring the deeds to your home or other real estate
to the trust, plus transferring stocks, bonds, and other
financial accounts into the trust.

Note that you will not give up any control over the assets.
In fact, with a revocable living trust, you can always
revoke the trust at any time during your lifetime, or take
assets back out of the trust, should you choose to do so.
When you write a check from a trust bank account, you may
have to sign it "Mary Smith, Trustee of the John and Mary
Smith Family Trust," instead of simply signing it as "Mary
Smith," as you might do now.  For that little bit of extra
writing you will have to do when you sign checks and other
documents, the payoff in dollars and peace of mind can be
enormous.

You retain complete control, and there are no income or
estate tax consequences, good or bad, of having a living
trust, although it can be structured in such a way as to
take the place of a will, for the most part, and can save
large amounts of estate and inheritance taxes.  However,
those same savings can be achieved without a living trust,
by having a properly drafted will, so the living trust
itself should not be considered as a tax-saving gimmick.

In fact, the trust, if the trustees are selected properly
(usually, you and your spouse will be the "trustees"),
will not even have to file any returns with the IRS.  You
will continue to report any income from trust assets on
your own individual income tax return, just as though the
trust did not exist.

Why go to the trouble of setting up a revocable living trust,
if there are no tax advantages?  Mainly to save on probate
fees.

In most states, when you die, the process of transferring
the trust assets to your heirs under the terms of the trust
will be relatively simple and straightforward, with no
lengthy and expensive probate court proceedings and the
accompanying hefty legal fees you would pay to a probate
lawyer.  In effect, the revocable trust, which becomes
irrevocable when you die, takes the place of a will, in
determining how your assets are to be distributed (after
paying death taxes, if any, and funeral expenses) when you
die.

CAUTION:  Having a living trust will not completely
eliminate the need for a will.  Very few people are tidy
enough and sufficiently organized to keep ALL of their
assets in their living trust.  Since the trust document
will only govern the disposition of the assets that are
held by the trust on the date of death, any assets you have
intentionally or inadvertently left outside the trust,
such as personal effects or financial accounts that are
still kept in your name, will not be distributed according
to the trust instrument.

Thus, you will still need to have a will for any such other
assets.  Often, such a will is designed as a "pour-over"
will, one which "pours over" any other assets into the
trust at the time of your death, so that they will go into
the trust and be distributed to your heirs in accordance
with the trust instrument.  But such assets will usually
have to first go through probate, before going into the
trust, so you should try to minimize the amount of assets
you leave outside your trust at the time you die.

Note that one other important use of a revocable trust is
that it can be designed so that a child, spouse, or other
person is also a trustee, and can take over management of
your finances if you become mentally incapacitated, as a
result of stroke, Alzheimer's or other incapacity.  This
can be far simpler and less costly than if your children
or spouse have to go to court and possibly fight over who
is to be appointed to look after your affairs.  By setting
up a revocable living trust and naming as a co-trustee the
person you trust most to handle your affairs if you should
become incapacitated, you will have made it relatively
simple for such child or other person to take over for you
when the time comes.

INCOME TAX ASPECTS OF ESTATE PLANNING.  One of the basic
estate planning strategies for reducing income taxes is to
transfer assets that produce taxable income to your children.
While there is no longer much opportunity to do so for
children who are under age 14, it is still possible to give
assets to older children and let them pay the income tax at
low (often 15%) income tax rates, especially if you are in
a high bracket of 31% or even 39.6% (federal tax rates).
There can be even more tax savings if there are also state
income taxes in your state, and if such rates are "graduated"
so that your children will also pay a lower state tax rate
on the income than you would.

Fortunately, federal tax law allows you to give up to
$10,000 every year to each child (or grandchild or other
individual), free of any federal gift taxes.  If you are
married, you and your spouse can give a total of $20,000 a
year, free of gift taxes, as explained below, while at the
same time reducing the size of your estate that will later
be subject to estate tax when you die, so that such lifetime
gifts can reduce both income and estate taxes.

ESTATE AND GIFT TAX PLANNING.  Listed below are brief
summaries of some of the basic ways to reduce estate and
gift tax liabilities.  Since the gift tax, which applies
to money or assets you transfer during your lifetime, and
the estate tax, which applies to transfers occurring when
you die, are "integrated," it will actually be beneficial
in some cases to INCREASE your gift tax liability, in
order to ultimately reduce your estate taxes, as described
below.  In most cases, however, the various estate planning
strategies are designed to avoid both gift and estate taxes.

Before we describe any of the basic strategies for saving
on estate and gift taxes, it is useful for you to first
have a general understanding of how the federal estate and
gift tax law works.  As noted above, the gift tax and the
estate tax are integrated, with a single set of tax rates
that apply for both taxes.  Because the actual details of
the estate and gift tax laws are enormously complex, and
riddled with countless exceptions, keep in mind that the
following discussion only describes the most basic features
of the estate and gift tax laws, and strategies for reducing
such taxes.

Here's how the system works, in a nutshell:

  . The person who makes a gift during his or her lifetime
    (you, for example) is called a "donor."  The person
    who receives the gift is called the "donee."

  . All gifts (other than charitable gifts) that exceed
    the $10,000 per donee annual exclusion discussed
    above are taxable, with the exception of certain
    gifts in the form of direct payments of medical
    expenses or tuition expenses on behalf of a donee
    (if paid DIRECTLY to the medical provider or the
    educational institution by the donor).

    TAX PLANNING TIP:  Never give your children the money
    to pay medical expenses or school tuition, if you
    are concerned about going over the $10,000 annual
    gift exclusion.  Instead, be sure you personally
    write the checks directly to the doctor, hospital,
    or school.  If you pay such expenses directly, there
    is an unlimited gift tax exclusion for those items,
    which is in addition to the $10,000 annual exclusion.
    If you don't pay them directly, such expenses will
    instead be counted as gifts against the annual $10,000
    limit, and may use it up quickly or even may cause
    you to exceed the limit, resulting in "taxable gifts."
    (NOTE:  Under the Taxpayer Relief Act of 1997, the
    annual $10,000 exclusion will be indexed for inflation
    after 1998.)

  . Tax rates on "taxable gifts" (gifts in excess of the
    annual exclusion) start at 18% on the first taxable
    gifts you make in your lifetime, and go up to 55% on
    gifts in excess of $3 million.  All the taxable gifts
    (in excess of the annual exclusion) you make in your
    lifetime are cumulative, which means that the more
    gifts you make, the higher the tax rate will be, up
    to the maximum 55% tax rate.

  . However, most people never have to pay any gift tax,
    even if they make some taxable gifts, because every
    person has a lifetime "unified credit" of $192,800
    which can be used to offset both gift and estate tax
    liability.  The way the gift and estate tax tables
    work, this means you can give up to $600,000 in
    taxable gifts in your lifetime and not have to pay
    any gift tax.  Once your cumulative taxable gifts
    exceed $600,000, they will be taxed at rates of
    between 37% and 55%, however.  (The 55% bracket
    applies to taxable gifts in excess of $3 million, as
    was noted)

---------------------------------------------------------
    NOTE:  Congress has increased the $600,000 lifetime
    exclusion, to $625,000 in 1998, and gradually
    increasing to $1 million by the year 2006.
---------------------------------------------------------

  . Gifts made to your spouse are usually entitled to
    an unlimited marital deduction, so that those
    gifts are almost never considered "taxable gifts"
    and thus do not reduce your lifetime "unified
    credit."

  . When you die, your taxable estate is subject to
    federal estate tax under the same rate structure as
    described above.  Since the estate and gift taxes
    are part of a single integrated system, any lifetime
    taxable gifts you have made must be added to the
    amount of your taxable estate, in computing the taxable
    estate.  Thus, if you made lifetime gifts that used up
    any of the $192,800 lifetime "unified credit," that
    will reduce the amount of such credit that can be used
    to reduce the estate tax at your death.

  . Note that your taxable estate is your "gross estate"
    (basically, everything you own at time of death), less
    certain deductions for probate and administration
    expenses of the estate, debts owed at time of death,
    funeral expenses, charitable bequests, and other items.
    Also, the main deduction for most married individuals
    is the estate tax "marital deduction."  As with the
    gift tax, an unlimited deduction is allowed for assets
    you leave to your surviving spouse.  That is, if you
    leave all your assets to your spouse, you can completely
    zero out your estate liability.  However, as noted
    below, this is often not the best estate tax strategy.

  . In addition to estate and gift taxes, you must always
    be aware of the incomprehensible and convoluted
    "generation-skipping tax" (GST) as well, if you make
    gifts to younger people, other than your spouse or
    children.  This means that if you make gifts to your
    grandchildren, directly or by setting up a trust, you
    may be subject to the confiscatory GST, which applies
    at a flat rate of 55%.  Fortunately, every individual
    has a lifetime $1 million exemption from the GST, so
    it is generally a concern only for those very wealthy
    families who can afford some of the few lawyers who
    actually understand how this complex tax works, and
    can plan to get around it.

  . Income taxes cannot be totally ignored when devising
    estate and gift tax reduction strategies.  For example,
    when you die, all your assets generally receive a
    "step-up" (or "step-down") in their income tax basis.
    Thus, if you have held IBM stock for many years, for
    which your cost is $80 a share, and it is worth $150
    a share when you die, the stock will get a "step-up"
    in tax basis to its current value at the date of your
    death.  Thus, your heir who inherits the stock will
    have a "tax basis" of $150 a share, and can sell the
    stock immediately for no gain, unless he or she sells
    it for a price above $150 a share.  By contrast, if
    you had gifted the stock to your heir during your
    lifetime, the heir would generally get only your
    "carryover" basis of $80 a share (or less, if the
    value was less than your $80 cost at the time you made
    the gift).  Thus, if you had gifted away the stock
    during your lifetime when it was worth only $100 a
    share, you would have kept the increased value ($150)
    out of your taxable estate when you die, but your heir
    who sells it for $150 a share would have a taxable
    capital gain of $150 - $80, or $70 per share.

    In short, while you might save estate taxes by making
    lifetime gifts of assets that are rising in value
    (especially if using your annual $10,000 gift tax
    exclusion), your donee may pay more income tax when he
    or she eventually sells such an asset, so there can be
    trade-offs.  This is not a concern with gifts of cash,
    however, since the tax basis of cash is always its
    face value.

ESTATE AND GIFT TAX STRATEGIES.  The following are some of
the most common, and simplest, estate planning strategies
for reducing your estate and gift taxes.

  . USING THE ANNUAL GIFT EXCLUSION.  If you have an
    estate that is large enough that you may have to
    pay estate taxes at death, and feel like you can
    afford to part with some of your wealth during your
    lifetime, a regular program of making annual gifts
    of $10,000 per child (or grandchild) can make a
    great deal of sense.  If you are married, you and
    your spouse can, in total, make gifts of $20,000 a
    year, plus any direct payments of medical expenses
    or tuition, for a child or other donee.  Such a gift
    program can be somewhat complicated if your children
    are too young (or irresponsible) for you to want to
    put the money directly in their hands, but there are
    ways to put the money in a trust for them where they
    cannot touch it until age 21 (or beyond, using certain
    sophisticated trust techniques, such as so-called
    "Crummey" trusts).

    Making such gifts, which are excludable and thus do
    not use up any of your lifetime "unified credit," not
    only removes some of the value from your taxable estate
    at the time of your death, but the income on such money,
    securities, or other assets can be shifted to your
    children, often in income tax brackets that are lower
    than yours, and thus can save income taxes during your
    lifetime as well saving on estate taxes at your death.

  . FAMILY LIMITED PARTNERSHIPS.  One of the more useful
    and sophisticated estate planning strategies, if you
    are relatively affluent, is to establish a family
    limited partnership (FLP), or family limited liability
    company, although the latter are still relatively new
    and untested for estate planning purposes.

    In a typical FLP setup, much of your assets that are
    expected to grow, such as real estate or business
    assets, are placed in a limited partnership, with you
    or your spouse, or both, as the general partners, and
    each of you also holding limited partnership interests.
    Then, each year, you will give part of your limited
    partnership interests to the children, so as to maximize
    tax-free gifts under the $10,000 (or $20,000) per-donee
    annual gift tax exclusion described above.  In larger
    estates, you might make larger gifts of such partnership
    interests, in excess of the annual gift tax exclusion,
    resulting in "taxable gifts," perhaps up to the $600,000
    lifetime limit for each spouse, which could be done
    without causing you to incur any gift tax liability.
    In appropriate situations, you might choose to give the
    children even larger amounts that would result in some
    lifetime gift tax liability.

    Advantages of a family limited partnership include:

      - Shifting some of the FLP's income to the children,
        as limited partners (if they are 14 or older).

      - Shifting growth in assets of the partnership to
        the children, thus removing the future value of
        their share of the assets from your estate, while
        you and your spouse retain control of the assets
        in the FLP.

      - Providing asset protection (in every state but
        Louisiana) from "charging orders" against your
        children's interests in the FLP, in the event one
        of your children goes bankrupt or gets sued for
        something like an auto accident.  Using a limited
        liability company (LLC), or in some states a
        limited liability partnership (LLP), may even
        provide similar protection for claims made against
        you, the parent, which protection a limited
        partnership cannot provide, if you are one of
        the general partners in an FLP.

      - At your death, not only will the children's
        share of the partnership assets escape estate
        taxation, but your remaining retained interest
        in the FLP, which will be included in your estate,
        can qualify for market and minority discounts in
        reporting their value for estate tax purposes.  In
        some cases, the interests in a limited partnership
        may be valued at as much as 25% or 30% less than
        the value of the underlying assets, as a result,
        which could save you a great deal of estate tax,
        as compared to directly owning the same underlying
        assets.

  . STRATEGIES FOR DIFFERENT SIZED ESTATES.  Other basic
    strategies differ somewhat, based on the approximate
    size of your estate, and some are applicable only for
    married couples.  Here are some of the key estate
    planning strategies, for estates of between $600,000
    and $1.2 million, those over $1.2 million, and for
    very large estates:

      - Over $600,000, but under $1.2 million.  Estates
        in this size range, which are relative common,
        are perfect candidates for using a "bypass" or
        "credit shelter" trust, in the case of married
        couples.  To take a simple example, assume that
        you and your spouse have total net worth of
        about $1.2 million.  If you wish, you can make
        your wills so that the first of you to die
        simply leaves everything to the other, and, thanks
        to the estate tax unlimited marital deduction
        there will be not be any estate tax, on the "first
        death."  While that sounds simple and attractive,
        it is a tax trap.  If you die tomorrow and leave
        everything to your spouse, your spouse will have
        $1.2 million in assets.  When he or she dies, with
        only a $600,000 exemption from estate tax, the
        federal estate tax on his or her estate of $1.2
        million be about $235,000.

        Believe it or not, that $235,000 tax is optional.
        That is, you could COMPLETELY avoid it with just a
        little bit of estate planning before the first
        spouse dies.  No married couple with $1.2 million
        or less in net worth should ever pay any federal
        estate tax, with proper estate tax planning.

        All that you would need to do would be to set up
        living trusts in your lifetimes, or, if you were
        not concerned about probate costs, have an estate
        attorney draw up wills for you that provide for
        the creation of a "credit shelter" trust when the
        first of you dies.  Thus, your will might provide
        that when you die, $600,000 would go into a trust
        that would pay your spouse all its income for the
        rest of your spouse's life, and then distribute
        the trust assets directly to your children when
        your spouse dies.  Those trust assets would not
        be included in your spouse's estate at his or her
        death.

        As such, your transfer to the trust would not
        qualify for the unlimited marital deduction, but
        would "use up" your entire $600,000 lifetime amount
        that can pass free of estate or gift taxes.  Thus,
        you could leave the rest of your estate to your
        surviving spouse, which would pass to him or her
        free of estate tax under the unlimited marital
        deduction.

        Later, when your spouse died, assuming no change
        in the total assets of $1.2 million ($600,000 in
        the "credit shelter trust" and $600,000 of assets
        owned outright by your spouse), NO estate tax
        would be payable at her death, since only the
        assets she owned directly would be included in
        her taxable estate.

        TAX SAVINGS:  $235,000 of estate taxes are saved in
        the above example by using a bypass trust, compared
        to leaving all your assets outright to your spouse
        at your death.

        In short, simply by spending a few hundred dollars
        to have an attorney draw up wills for you and your
        spouse, to make sure that up to $600,000 will go
        into a trust when the first of you or your spouse
        dies, that $600,000 (plus any growth in its value
        until the second spouse dies) will not be included
        in the estate of the second spouse to die, and thus
        will completely escape estate taxes.

      - Estates of over $1.2 million.  Estates of this size
        can still benefit from putting $600,000 in a bypass
        or "credit shelter" trust when the first spouse
        dies.  However, there will usually be some estate
        tax to pay on the second death, since the surviving
        spouse will have inherited over $600,000 outright at
        the death of the first spouse, and will only have an
        exemption equivalent to $600,000, with any excess
        assets over $600,000 being subject to estate tax
        at rates of 37% to 55%.

        However, such larger estates are good candidates for
        irrevocable life insurance trusts.  While the use of
        such trusts requires careful planning and excellent
        legal advice, it may be possible in some cases to
        shelter millions of dollars from estate tax, by
        creating irrevocable trusts (trusts from which you
        cannot take back the assets) for your children, and
        putting in just enough money in each such trust
        every year to pay the premiums on a large life
        insurance policy on your life, or on your spouse's
        life.  If properly structured, your children may
        be able to receive millions of dollars of life
        insurance proceeds when you die, totally free of
        estate tax.  However, as noted, you will need a
        sophisticated estate planning attorney to help you
        set up and operate such trusts.  This will be
        costly, but well worth it for wealthy persons who
        wish to leave large amounts of life insurance
        benefits to their children, free of any estate
        tax, at the time of their death.

      - Very large estates.  For the very wealthy couple who
        accumulates millions of dollars of net worth, if the
        spouses are fairly close in age, the estate plan
        may be structured so that up to $3 million of assets
        are intentionally allowed to be subjected to estate
        tax at the first death, either by going directly
        to the children, or going into a bypass trust for
        the surviving spouse, with the rest of the estate
        passing estate tax-free to the spouse on the first
        death, under the marital deduction.  The reason
        for voluntarily paying the tax on up to $3 million
        earlier than necessary, is that the tax rates on
        taxable estates of up to $3 million are 37% to
        53%.  Thus, considerable tax would be saved by
        paying tax on amounts up to $3 million at the first
        death, at rates of less than 55%.  Then, if the
        second spouse dies within a few years after the
        first spouse, that $3 million, plus growth, which
        would otherwise be included in the second spouse's
        large estate, and all taxed at the top rate of 55%,
        will instead be excluded from the second spouse's
        estate, if it went to the children or into a trust
        at the first death.  In addition, the estate tax
        that is paid at the first death also reduces the
        amount of assets in the surviving spouse's estate,
        thus further reducing the estate tax that will be
        imposed on his or her estate at the second death.

        The above approach would generally make sense only
        if the combined estates were worth $6 million or
        more.  For large estates between $3 and $6 million,
        the usual approach is to pay tax on about half of
        the combined estates at the first death, rather than
        the full $3 million.  Thus, if the combined estates
        are $4 million, $2 million would be allowed to be
        taxed on the first death, and the other $2 million
        (ideally) at the second death, so that neither the
        husband nor the wife's estate would be taxed at a
        rate of more than 45%, by equalizing the size of
        the two estates as much as possible.  (Estate tax
        rates go no higher than 45% on an estate of $2
        million.  While this is high, it is better than
        paying 55% in the top bracket over $3 million.)

      - Paying gift taxes.  In some cases, for either
        married couples or single individuals, it may make
        sense to pay gift taxes during their lifetime,
        by making taxable gifts of over $600,000 in total
        (besides taking advantage of the annual $10,000
        per donee gift tax exclusion).  Thus, for a single
        person with two children, who gave them $100,000
        each year ($50,000 to each child) for 10 years,
        $20,000 each year would pass tax-free each year
        under the annual exclusion, while $80,000 would be
        "taxable gifts."  After $600,000 in taxable gifts,
        the donor would begin having to pay gift tax on
        the excess over $600,000, having used up all the
        lifetime "unified credit."  After 10 years, the
        total taxable gifts would be 10 times $80,000, or
        $800,000, the last $200,000 of which would be
        subject to gift taxes totalling $75,000.

        While it may seem odd to pay gift taxes during
        your lifetime that could be avoided by making
        smaller gifts, the advantage of such a program
        can be to get assets that are likely to grow in
        value out of your estate.  Thus, in the above
        example, if the $800,000 of taxable gifts made
        during the donor's lifetime has grown to $1.8
        million by the time of death, he or she will
        have reduced his taxable estate at death by
        $1 million, which may reduce estate taxes by
        nearly half that amount (or by up to 55% of
        that amount, in a very large estate over $3
        million in size).  In addition, the $75,000 of
        gift tax that was paid in the donor's lifetime
        also reduces the size of the remaining estate
        at the time of death, for further estate tax
        savings.

We hope the above discussion will give you a basic grasp
of the possibilities of saving very large amounts of tax
dollars (and probate fees) by spending relatively small
amounts to do some intelligent estate planning.  While the
details are exceedingly complex, and you will need to hire
some excellent legal talent to attain your estate planning
objectives in most cases (other than basic strategies like
making $10,000 annual gifts), the payoffs can be enormous,
if you are concerned about passing on as much as possible
of your lifetime savings to your spouse and descendants.

Estate planning is something that is very easy to put off,
as most of us do not like to contemplate the reality that
we are going to die someday.  However, if you put it off
too long, and die unexpectedly, you will leave a large
part of your estate to probate lawyers, the IRS, and to
state death tax collectors, if you have not put into
effect a good estate plan.  In addition, if you die
without a will or testamentary trust, state law will
decide how your assets are to be divided up among your
heirs, which will often be a disaster for tax purposes,
and may also result in some of your assets being inherited
by certain children or other relatives to whom you would
prefer to have left nothing.

BOTTOM LINE:  Don't put off your estate planning, once you
have any significant assets to be concerned about.

STATE DEATH TAXES.  Layered on top of any federal estate
tax planning you may do is the need to also plan for (or
around) state death taxes, which generally fall into one
of three categories.

The first category consists of a "pick-up" tax only, where
the state tax is equal to the allowable amount of the
federal estate credit for state death taxes.  In computing
the federal estate tax, a state death tax credit is allowed,
if the estate has had to pay state death taxes, up to a
certain limited amount.  States with only a "pick-up" tax
will only impose enough tax on your estate to use up the
entire amount of the federal credit.  Thus the federal tax
is offset dollar for dollar by the state death tax, so
that the state tax doesn't increase the total amount of
tax imposed on the estate.  For example, if the federal
estate tax (before credit for state death taxes) is $100X,
and the allowable credit is $2X, a state with only a
pick-up tax would impose a state death tax of $2X, which
would qualify as a credit against the federal tax, reducing
it to $98X.  Thus, total death taxes remain $100X; the
state simply diverts $2X of the tax its treasury, rather
than having all of the $100X of tax go to the U.S. Treasury.
Most 31 states follow this "no additional tax" approach to
death taxation.
@CODE: AL AK AR AZ CA CO CT FL GA HI ID IL ME MA MI MN MO NV NM ND OR RI SC TX UT VT VA WA WV WS WY

@STATE has adopted this type of death tax on estates.
@CODE:OF

The second category, adopted by only four states, is a state
estate tax, computed somewhat in the same manner as the
federal estate tax, except at much lower tax rates.  However,
if the state estate tax is greater than the allowable federal
credit, any such excess will represent an additional tax the
estate will have to pay.  For example, if the federal estate
tax is $100X and the allowable credit $2X, but the state's
estate tax is $5X, only $2X is allowed as a credit against
the federal tax, reducing it to $98X, so that the combined
federal and state estate taxes will be $103X.

Note that the state tax will never be LESS than the amount
of the allowable federal credit, because every state also
has a "pick-up" tax provision that will kick in and impose
an additional state tax, in the event that the state death
tax, as otherwise computed, happens to be less than the
amount of the allowable federal credit.
@CODE: MS NY OH OK

@STATE is one of the four states with an estate tax.
@CODE:OF
@CODE: NY
However, under 1997 legislation, New York will soon change
over to a "pick-up" type of estate tax that is equal
to the allowable federal state death tax credit.
@CODE:OF

A third category of death taxes, adopted in 15 states,
is the inheritance tax, which is imposed on the transfer
of wealth to each individual heir, usually with larger
exemptions for persons, such as spouses or children, who
are more closely related to the decedent, and smaller
exemptions for amounts received by less closely related
(or unrelated) persons.

As with states that have estate taxes, inheritance taxes
are often larger than the allowable federal credit for
state death taxes, resulting in an overall increase in the
total federal and state death taxes imposed on an estate.
In fact, inheritance tax exemptions are usually much less
than the $600,000 federal estate tax exemption, so that
many estates that are too small to incur any federal
estate tax may still be subject to substantial state
inheritance taxes, which can considerably complicate the
estate planning process.
@CODE: DE IA IN KS KY LA MD MT NB NH NJ NC PA SD TN

@STATE imposes an inheritance tax.
@CODE:OF

Six states also have gift taxes on lifetime transfers.
Unlike the federal estate and gift taxes, which are
integrated into one system, under which the decedent's
lifetime gifts and transfers at the time of death are all
lumped together, with only one lifetime exemption of
$600,000 allowed, the states with gift taxes (Connecticut,
Delaware, Louisiana, New York, North Carolina, and Tennessee)
apply one set of exemptions to lifetime gifts, and a new
exemption or set of exemptions for transfers at death, with
no aggregation of lifetime gifts and transfers at death.

(NOTE:  The Delaware gift tax is repealed, for gifts made
on or after January 1, 1998.  The New York gift tax is
completely repealed on or after January 1, 2000.)