Editors Note: This story was updated on 6/10.

Everything you own is considered part of your estate when you die. To grasp the importance of planning for the distribution of your worldly goods, consider all the things that influence what happens to them.

1. The role of probate

This is the procedure by which state courts validate a will's authenticity, thereby clearing the way for the executor to collect and pay debts, pay taxes, sell property, distribute funds and carry out other necessary tasks involved with settling an estate. The process can be slow and expensive, and probate fees can absorb 3% to 7% of the estate's assets. And if there is a "will contest," costs will skyrocket.

Mindful of criticism and the spread of devices designed expressly to keep assets out of the grip of probate courts, most states have adopted a streamlined procedure for small estates, with informal procedures requiring little court supervision. Sometimes all that's necessary is for the appropriate person to file an affidavit with the court and have relevant records, such as title to property, changed. Formal probate, in which major steps along the way are supervised by the court, is commonly reserved for large estates.

Not all of your estate has to go through probate. Among the items exempted from probate -- but not necessarily from taxes -- are life insurance payable to a named beneficiary, property left in certain kinds of trusts and assets such as homes and bank accounts held in joint tenancy with right of survivorship.

2. Joint ownership

Property jointly owned with a right of survivorship -- the form that is commonly used by married couples but can be employed by any two people -- automatically passes to the other owner when one owner dies. Tenancy by the entirety, another form of joint ownership, can apply only to married couples and isn't recognized in all states. The pluses and minuses of joint ownership are discussed in detail later. For now, suffice it to say that it is an important estate-planning tool.

3. Federal estate and gift taxes

Despite all the attention given to the federal estate tax, few estates ever actually owe it. By one estimate, for example, the estates of fewer than 15,000 people who died in 2007 were large enough to trigger the much-vilified tax, and that number has dropped as the threshold for applying the tax has risen. For 2009, the first $3.5 million of an estate is tax-free (up from $2 million for 2008), so only taxable estates larger than that have to pay the tax, which is a flat rate of 45%, Although no one ever thought it would happen, Congress allowed the estate tax to lapse at the end of 2009 while lawmakers were busy debating health care reform. As the law now stands, the estate tax is scheduled to come back to life in 2011 with a skimpy $1-million exemption and a top rate of 50%. But Congress is expected to reinstate the estate tax at least at the 2009 levels, retroactive to the beginning of 2010. (Some in Congress want to boost the estate tax exclusion to $5 million and reduce the tax rate to 35%).

Under prior law, married couples who left their assets to their spouse could avoid tax on the entire estate of the first spouse to die, no matter how much it was worth. This is called the marital deduction. But if the first spouse died without fully using his or her exemption, the remaining amount was wasted. Estate tax reform proponents, including President Obama, support making the exemption portable. Thus, if one spouse were to die, the unused exemption would simply pass through to the survivor, effectively allowing an estate-tax exemption of at least $7 million for a couple (assuming Congress reinstates and extends the estate tax thresholds in effect for 2009; even more if congressional Republicans have their way). Couples could effectively double their exemption under prior law, too, but doing so often demanded complex estate planning. Making the exemption portable would greatly simplify their financial planning.

If your estate is likely to approach or surpass the taxable level, one way to reduce the estate-tax hit is to give away assets before you die. You can give away up to $13,000 a year to as many recipients as you wish without incurring what's called a gift tax. (For married couples, the limit is $26,000 per recipient.) The gift tax is designed to prevent people from giving away too much of their wealth to prospective heirs and thus escaping the estate tax entirely. Current law allows you to give away up to $1 million during your lifetime tax-free, above and beyond those $13,000 annual tax-free gifts.

There is no limit on gifts between spouses and no limit on the marital deduction described above. This means that, with proper estate planning, the marital deduction and the estate-tax exclusion can be used to pass estates of any size from one spouse to the other without incurring federal estate tax. To make sure that you take full advantage of this opportunity and to minimize estate taxes upon the death of the second spouse, consult with an experienced estate lawyer familiar with the laws of your state.

4. State inheritance taxes

Until 2005, all 50 states and the District of Columbia had an estate tax, too: a so-called pickup tax, which applied only to estates owing the federal tax. The pickup tax didn't actually increase the amount an estate owed but simply used a tax credit to channel revenue to your state rather than to the federal treasury. In 2005, though, the federal credit disappeared and so did the state's pickup tax. Currently, the District of Columbia and 14 states (Connecticut, Delaware, Maine, Maryland, Massachusetts, Minnesota, New Jersey, New York, Ohio, Oregon, Rhode Island, Tennessee, Vermont, and Washington) collect an estate tax at the estate level.

Seven states--Indiana, Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania--also levy an inheritance tax, which is paid by the beneficiary rather than the estate. (And, yes, that means both Maryland and New Jersey collect both an estate tax and an inheritance tax). In all states, transfers of assets to a spouse are exempt from the tax. In some states, transfers to children and close relatives are also exempt.