We all know we're going to die, but who wants to face mortality? Yet living in denial and avoiding estate planning can cost a client a lot of money in taxes. That's where a financial adviser can help--spotting potential problems, gently broaching the subject and guiding the client to an attorney to execute a plan.

Stuart Friedman, an estate planning attorney with Pinkerton & Friedman in Munster, Ind., believes "an estate planning approach needs to be a team effort including the attorney, accountant and financial planner who is knowledgeable about life insurance."

Clients need estate planning assistance. "Sixty-six percent of people die without a plan," says George Guertin, an estate planning attorney in North Haven, Conn. "It's cheaper to die with a plan. The money goes where you want it to go."

With estate planning, clients can increase inheritances and charitable contributions, if they so desire, and minimize income and estate taxes. Even so, death is a difficult subject. Noel Reitmeister, an A.G. Edwards rep in Merrillville, Ind., never uses the word death. "I say to people, 'Tom, if you're not here, what would you like to have happen with your money?'"

Gary Cotter, regional vice president of estate planning for Prudential Securities in Tampa, Fla., who trains and works with brokers on estate planning, takes this approach with clients: "We're here today to help you build and preserve an investment portfolio. My role is to help you make sure to transfer wealth--that assets go to people you care about versus the government."

Tax-Free TransfersIn 1999, each individual gets a lifetime estate tax credit (§211,300) that shelters §650,000 worth of assets. A person can bequeath that amount of his or her estate free from federal estate and gift tax. Married couples are also allowed an unlimited marital deduction. If, however, both spouses want to preserve their applicable exclusions, they must create a bypass trust, which bypasses the surviving spouse's estate and protects the deceased spouse's exemption.

Aside from the applicable exclusion, individuals can gift §10,000 each to an unlimited number of recipients each year. "You get people interested in putting §10,000 per year in an account in the name of a child," Cotter says. "Then we have the children as clients and have a reason to talk to them."

Simple Steps for RepsA will is not a complete estate plan. Some assets move separately, such as IRAs, which transfer to beneficiaries. This can create conflicts. For example, Kay Silsby, vice president of investments with Salomon Smith Barney in Stuart, Fla., discovered during a client meeting that the wife is the beneficiary for 100% of her husband's IRA. "But the will says the distributions go to the three children. The beneficiary form takes precedence over the will."

Along with checking IRA beneficiaries, reps can encourage clients to complete Transfer on Death (TOD) forms. Two caveats from Gilbert Zepeda, who runs Robertson Zepeda & Associates, a Royal Alliance branch, with partner Bill Robertson in Fort Worth, Texas. First, TODs don't work in community property states because property automatically reverts to the surviving spouse. Second, watch that TOD designations don't conflict with the will.

Reps can also find out how assets are titled. To take advantage of a bypass trust, the first spouse to die must have assets to will to the trust. If this spouse doesn't own enough property, some or all of the applicable exclusion would be lost.

Misconceptions and Tall TalesEstate planning misconceptions abound. Many people assume that life insurance death benefits are not included in an estate's value. Wrong. And because they're part of the estate, they're subject to estate tax. There is a way around this--creating an irrevocable life insurance trust. The trust owns the policy, so it's not included in the estate and is not subject to estate tax. Check with experts to make sure such a trust is set up properly.

Another fallacy: An inherited IRA is not subject to income tax. Wrong again. In fact, up to 77% of an IRA can be lost to estate and income taxes. One way to delay some taxes is to make children beneficiaries. Silsby explains, "You can use multiple IRAs--one for you and your spouse and separate ones for other beneficiaries," such as children. "The owner dies, and the child owns it. Calculations are based on their current life [expectancy]. Dollars can keep compounding. It becomes an eternal IRA."

If, however, the IRA owner did not elect properly, "the child inherits the IRA and has to take out dollars over five years or a lump sum," Silsby says.

Naming a charity as an IRA's beneficiary and replacing its value with life insurance is another way to reduce the tax burden, says Cal Brown, head of Payne Financial Services in Manassas, Va. Alternatively, Brown says the client can "take IRA withdrawals to pay a premium on a life insurance policy to pay estate and income taxes for the IRA."

Common Problems and MistakesMany people procrastinate in estate planning. "When people start giving property away, and they're fairly wealthy, assets have appreciated in value," says Gregg Parish, academic associate at the Denver-based College for Financial Planning. "They have to pay more gift tax than if they did it earlier." Donors owe tax (at estate tax rates) on gifts in excess of §10,000 a year.

Ideally, Friedman would like to meet initially with clients in their 40s or 50s, but most of the time they're in their 60s, he says. At that point, they might have trouble getting life insurance.

The No. 1 problem is implementation, says Marc Freedman, president of Freedman Financial Associates in Peabody, Mass. "They finally go to the attorney, have the documents drafted and then drop the ball."

Uncle Sam doesn't procrastinate. Nine months after someone dies, he collects. "If the [couple's] estate is more than §1.3 million, they're going to have to pay estate taxes of 37% to 55%," Robertson says. "If they have no liquidity, then assets have to be sold."

Life insurance can be added to pay these taxes. "Clients are sometimes reticent about adding insurance," Zepeda says. If that's the case, he runs down the list of assets they have, asking which ones they want sold to pay the tax man. The business? The home? "It wakes them up."

Beneficiary designations can be an issue, too. Many people have only named their spouse as beneficiary of IRAs, insurance and trusts. "It's important to have successor beneficiaries," Brown says.

Naming only a spouse as beneficiary can be especially problematic in a second marriage. "You can unintentionally disinherit children from the first marriage," Brown says. "When the second spouse dies, it goes to her kids." Trusts can avert this.

Another mistake couples make is not having variable annuities owned jointly, Brown says. If one spouse dies as the sole owner, the surviving spouse pays ordinary income tax on the gains, Brown says. With joint ownership, the survivor can continue the contract.

Incapacitation PreparationBecoming incapacitated is not only a health issue, but a financial one, too. "If it happens, how do you handle the finances and consent for medical procedures?" Parish asks. "A living will is one example, so are DNR [Do Not Resuscitate] orders, a trust set up to handle finances or a durable power of attorney."

Regardless of the client's asset level, Brown recommends a revocable living trust, advanced medical directives, a durable power of attorney and a living will.

Opportunities for RepsEstate planning presents opportunities for reps, but it's not quick business. "One of the hardest concepts for brokers is that estate planning is a three- to four-month process and involves two to three meetings," Cotter says.

But patience has rewards. An estate planner finds out about unspoken family goals and builds relationships with other professionals, Zepeda says. "The reward that comes back is [client] loyalty." And Robertson adds, "There's a better likelihood you'll become involved with the kids."

Overall, estate planning adds value. "If a client uses a financial planner to do a plan, it saves thousands of dollars in legal fees" because the spadework is done, Freedman says. "Attorneys love it when we've created a net-worth statement and are willing to act as a liaison in implementing estate planning documents."

Likewise, estate planning adds value to investing. Silsby says, "If I were the best financial adviser and could make [clients] §1 million, but Uncle Sam takes 55%, then I wouldn't be a good adviser."

There's an old saying, "People plan and God laughs." In estate planning, the saying might go, "People don't plan, and Uncle Sam laughs."

Here's what you need to know about eight basic types of trusts.

Bypass Trust (also called Credit Shelter Trust or Applicable Exclusion Trust): Allows the grantor to take advantage of the lifetime applicable exclusion. It bypasses the surviving spouse's estate. "The grantor's spouse is given some type of ownership interest, but not so much that the assets are included in the estate," says Gregg Parish, academic associate at the College for Financial Planning in Denver.

Charitable Remainder Trust (CRT): Client gifts highly appreciated assets to a CRT. The trustee sells the assets, avoiding capital gains taxes, and invests in an income-generating asset. The client, who may get an income tax deduction, receives an income stream. When the client dies, the remaining CRT assets go to the charity.

Grantor Retained Annuity Trust (GRAT) and Grantor Retained Unitrust (GRUT): With a GRAT, the client gifts assets to a trust and receives a fixed annual amount based on the initial principal for a defined period of time, then assets pass to beneficiaries. Valuation is discounted. With a GRUT, assets are gifted to the trust, and the client gets a fixed percentage of the assets, revalued annually for a defined period. With GRATs and GRUTs, if the client survives the defined period, the assets are not included in the estate.

Revocable Living Trust: A trust that a client can change during his or her lifetime, but becomes irrevocable upon death. Contains instructions for property distribution. Avoids probate, but not taxes. In case of incapacity of the grantor, the successor trustee would take over.

Qualified Personal Residence Trust (QPRT): Client donates a residence to a trust, but retains the right to live there for a fixed number of years. Client pays mortgage and real estate taxes into trust. When the time period ends, assets are turned over to beneficiaries. If the client wants to continue living there, rent must be paid. If the client survives the trust time period, the residence is excluded from the estate.

Qualified Terminal Interest Property Trust (QTIP): The basic use is for a client to direct where assets ultimately go. The trust's assets provide income to the surviving spouse, at which time heirs receive the money. QTIPs generally qualify for the unlimited marital deduction, so asset values are included in the estate of the survivor.

Testamentary Trust: A trust that takes effect when the client dies.

Estate planning can be a difficult subject to discuss with clients. Here are 27 questions advisers can ask to get the ball rolling.

1) What is your estimate of the value of your total estate, including your employee benefit programs (qualified plans and group life insurance)?

2) Do you have an estate plan? If so, when was the last time it was reviewed?

3) Who is responsible for keeping your estate plan up to date?

4) What would be the cost of settling your estate if you died yesterday?

5) Where will the money come from to pay your estate settlement costs?

6) What steps have you taken to control future estate taxes created by the growth of your assets?

7) What have you done to minimize income taxes after your death?

8) Have you executed a will? What steps have you taken to minimize the impact of probate?

9) Are you comfortable with the executors and trustees you've selected?

10) Have you done anything to enable your executor to pass family wealth on to your heirs in a manner appropriate to their needs and consistent with their capacity to handle wealth?

11) Does your will name a guardian for your minor children?

12) Do you have the right amount and type of life insurance?

13) How does your life insurance beneficiary arrangement impact your estate?

14) Do you have an irrevocable life insurance trust to exclude insurance proceeds from being taxed as part of your estate?

15) Does your estate plan take advantage of the §650,000 exemption? If you're married, have you set up a bypass trust to take advantage of both exemptions?

16) Do you have a living will or a durable power of attorney in case of catastrophic illness or disability?

17) Have you decided whether to title your assets jointly or individually?

18) Has your planning considered the impact of your premature death on your family as well as what happens if you outlive your resources?

19) Have you coordinated your estate plan with other financial planning matters?

20) What arrangements have you made for your potential long-term care needs?

21) Are you taking advantage of the §10,000 annual gift tax exclusion to minimize future estate costs?

22) Have you considered a charitable trust that could provide both estate and income tax benefits?

23) Are your estate planning documents organized in such a way as to make it easier for your heirs at your death?

24) Have you done anything to inform your family about your overall estate plan to help avoid potential conflict?

Additional Questions For Business Owners:

1) If you own a business, do you have a succession plan?

2) Do you have a buy-sell agreement for any interest you hold in a family business?

3) Have you considered a gift program involving your family owned business?

These 10 points are the basic financial data you'll need to start the estate planning process. Experts suggest getting copies of all trust documents, wills, insurance polices and beneficiary forms. Then consult your firms' specialists or outside experts for further action.

1) If the total value of a couple's estate (including life insurance proceeds) exceeds §650,000 in 1999, have they set up a bypass trust? This trust is needed to take advantage of both spouses' applicable exclusions from estate taxes.

2) How are the assets titled? They should be fairly evenly divided between both spouses. For example, if the couple has created a bypass trust, and the assets are all titled in one spouse's name, and the other spouse dies, one §650,000 exemption will be lost.

3) Does the client own life insurance policies? If so, the proceeds are included in the client's taxable estate upon death. This problem can be avoided by setting up an irrevocable life insurance trust.

4) What lifetime gifts has the client given beyond the §10,000 per recipient annual exception from gift taxes? If a client gave a §50,000 lump sum to a child, gift tax on §40,000 is due. The client could have paid out of pocket or used up part of his or her lifetime exclusion.

5) Is one spouse terminally ill? Assets can be repositioned to prepare for that person's death.

6) Does the client have a child with special needs? A trust can be drafted to protect the child. If the child receives an outright inheritance, it may disqualify him from receiving state benefits.

7) Has the client lived in a community property state--Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas or Washington? A spouse is entitled to half of all property acquired during a marriage in those states.

8) Is the client divorced and remarried? Has she changed her beneficiary designations? Does she want her assets to go to the second spouse or the children from the first marriage or both?

9) Will the client's heirs have enough liquidity to pay estate taxes due nine months after death? Has the client planned for heirs paying income taxes on the client's IRA and defined contribution plans? Unless a surviving spouse rolls it over into an IRA account, taxes must be paid within five years of death.

10) Does the client have a successor beneficiary named for his IRA or 401(k) account? If he doesn't have one, it goes to the estate, then through probate. For example, in Florida it gets a 5% haircut. Then, there's income tax.

The information was gathered from the book, "60 Minute Estate Planner" by Sandy Kraemer (ISBN 0735200602; Prentice-Hall Press, §20), as well as from attorney George Guertin in North Haven, Conn., and Gary Cotter, regional vice presidentof estate planning at Prudential Securities in Tampa, Fla.