Estate Tax Considerations

In addition to the income tax issues described above, the value of the assets in the Plan on P's death will be included in P's estate when determining estate tax liability. Unless P's beneficiary is P's spouse or charity (and the marital or charitable deduction applies), the Plan assets could be subject to estate tax of up to 49% in 2003 (due to decrease to 45% by 2007), depending upon the value of P's estate. If assets are withdrawn from the Plan to pay this tax, that withdrawal will generate an income tax liability on top of the estate tax liability.