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a family mourns at a funeral - estate planningNeglecting estate planning is a grave error.

If you don't plan your exit strategy before you die, it is likely that a lot more of your money and your property will go to Uncle Sam and the state tax man than your loved ones would have had to pay if you had been savvy about estate planning.Many people don't bother to create an estate plan because they don't think they have enough money to make it worth the effort, but John O. McManus, an estate attorney and founder of New Jersey-based McManus & Associates, points out that you don't have to be a billionaire for your estate to add up. If you have a 401(k), life insurance, and a house that appreciated in value despite the downturn, your estate is likely to surpass $1 million. If you're a small business owner, that total can skyrocket.

The estate tax has been a controversial political football in the last year. After much wrangling, Congress set the 2011 and 2012 federal estate tax exemption at $5 million ($10 million for couples), so most people will probably escape that levy on the federal level -- at least for the next couple of years.

But if you live in one of the 20 states and the District of Columbia that impose state inheritance taxes, your family could still be headed for estate tax hell when you go to heaven. If you live in New Jersey, Ohio or Rhode Island, the trip could be really brutal. Ohio sets its estate tax levy at $338,333; New Jersey at $675,000; and Rhode Island at $850,000.

McManus points out that smart estate planning can also help you escape these taxes and also avoid other potentially pricey costs of dying.

For instance, in Florida there is no estate tax, but probate fees can be significant, averaging between 3% and 7% of the total value of the estate. If the estate is worth $500,000 and the fees total 5%, your heirs will owe $25,000 -- not chicken feed. If you own property in more than one state, your estate may have to go through probate -- and pay fees -- in all of them.

Avoiding estate taxes and probate fees is where smart estate planning comes in. McManus says that whether you want to leave your money to your spouse or your dog, getting expert advice to spell out your wishes in a will -- and possibly a trust -- is a smart idea.

A trust may sound like something that only rich people need or can afford, but McManus pooh-poohs that notion. He says that if your final wishes are at all complicated that you should consider putting your property in a trust -- setup fees will probably be less than $1,000. That way you can make sure that your reckless son and his third wife won't spend up all of the money before your precious baby grandson gets any of it, for example.

Generally, estate planning isn't a do-it-yourself project, but insurer USAA, which doesn't do estate planning, does offer an array of resources to get people started. Don't hesitate, McManus says. The inevitable happens to all of us. Put an estate plan in place soon -- before it's too late.

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