• Thinking estate planning is not needed due to the provisions of the Tax Act of 2001. It is true that the estate tax is scheduled to be repealed — but only for the year 2010. Until then, the amount you can distribute to heirs other than your spouse without paying estate taxes will increase from $2,000,000 in 2006 to $3,500,000 in 2009. Estate taxes will be repealed in 2010, but reinstated again in 2011 based on 2001 tax laws. Rather than eliminating the need for estate planning, the Tax Act has made it more complex. Your estate planning strategies should encompass the possibility that you may die during three periods — the phase-out period, the year of estate tax repeal, and after reinstatement in 2011.

• Believing you don’t need estate planning because your estate won’t be subject to estate taxes. Even if your estate is less than the current exclusion of $2,000,000, there are other reasons to plan your estate. You probably still need a will to provide for your estate’s distribution and to name a guardian for minor children. You may also want to consider a durable power of attorney and a health care proxy.

• Relying solely on the unlimited marital deduction. With the unlimited marital deduction, you can leave all your assets to your spouse without paying any estate taxes. However, if you have assets in excess of the exclusion amount (detailed above), your heirs can’t utilize that exclusion amount if you leave all your assets to your spouse. Thus, when your spouse dies, they may pay more estate taxes than if you had left some assets to them.

• Not implementing an annual gifting program. You can make annual gifts, up to $12,000 in 2006 ($24,000 if the gift is split with your spouse), to any number of individuals without paying federal gift taxes. Since estate tax repeal is only scheduled for one year, this strategy removes assets, as well as any future appreciation or income generated on those gifts, from your taxable estate. Over a number of years, an annual gifting program can remove substantial assets from your estate.

• Failing to skip a generation on a tax-free basis. Leaving assets to children who already have sizable estates on their own means the assets will be taxed again when they bequeath them to your grandchildren. A better strategy may be to transfer those assets directly to your grandchildren, although you can only transfer $2,000,000 in 2006 before triggering an additional tax called the generation-skipping transfer tax.

• Forgetting that some assets bypass your will. Jointly owned property will transfer directly to the co-owner, while assets with named beneficiaries will transfer directly to those beneficiaries. If you don’t keep this in mind, some of your heirs could receive a larger percentage of your estate than you intended.

• Not updating beneficiaries. Beneficiaries for assets such as life insurance policies, 401(k) plans, and individual retirement accounts should be reviewed after major personal changes, like a marriage, divorce, death, or birth.

• Owning an insurance policy on your own life. While life insurance proceeds are always free from federal income taxes, owning the policy yourself will cause the proceeds to be included in your taxable estate, possibly subjecting them to estate taxes. Instead, you may want another individual or trust to own the policy, so it is excluded from your taxable estate.