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Being the executor of an estate established in 1995 (which is still open due to a traditional IRA distribution plan over a 5 year period),let me say that the impact of the 'state' Inheritance tax should not be neglected in any tax planning.

While the federal estate tax does not kick in until ~$600,000, the state inheritance tax (my example is Pennsylvania) taxes all assets left after allowed expenses are deducted. Of course, there is no tax on assets left to a surviving spouse. For all others, it is either 6%(for children as beneficeries) or 15%(for siblings or ohers as beneficeries).

In my particular situation, there was no federal estate tax due as the estate was not large enough to trigger that tax. A Federal Form 706 was filed and a credit, for the state taxes paid, was applied on that form.

So, even though a lot of the states are phasing out or reducing their inheritance tax, that aspect of estate planning should be considered, even though the estate may be modest. Remember, the STATE shall come first and be paid first.

Based on my experience, any investment in professional estate planning is money well spent; and if done correctly, is a fantastic bargin.

David Hartz
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