If you have not chosen the executor of your estate yet, do not wait any longer. This decision can have a substantial impact on your family’s future. In fact, advance planning by your executor can save your family thousands of dollars in estate tax. Here are some of the areas where an executor can make a big difference.

Credit shelter trusts: A credit shelter trust (or “bypass trust”) is de­signed to maximize use of the federal estate tax exemption. Currently, the exemption may effectively shelter assets worth up to $2 million from estate tax (for decedents dying in 2008). This is in addition to the unlimited marital deduction covering transfers to a spouse.

For example, say that your estate is worth a total of $2.5 million. With direction from your executor, you might leave half to your spouse and the other half in trust for your children. When you die, your family owes no federal estate tax. Upon your spouse’s death, the remaining funds may be sheltered by his or her estate-tax exemption. Result: No federal estate-tax complications.

Caveat: The federal estate tax is scheduled to be repealed in 2010, but revived the following year with a less-generous exemption. The rules in this area may change, but we will keep you posted.

QTIP trusts: In general, no marital deduction is allowed for property that passes to a spouse for his or her life and then to someone other than the surviving spouse. However, there is an exception for “qualified terminable interest property” (QTIP). If a special election is made by the executor, the value of the property may qualify for the marital deduction. The property generally is included in the taxable estate of the surviving spouse.

Power of attorney: This legal document authorizes another person to act on your behalf in the event you are incapacitated. In many cases, the executor is named the attorney‑in‑fact. A “durable” power of attorney remains in effect until you die.

Tax year: An executor may be able to choose a fiscal year for the estate. As a result, certain taxes that are due on the estate’s income may be deferred to a later year.

Administrative expenses: These expenses may be deducted either on the estate-tax return or the estate’s income tax return. The executor can choose the method that will produce the biggest tax savings for the beneficiaries.

Disclaimers: Your family may save taxes overall if one or more family members “disclaims” his or her interest in the estate. This strategy may be used to retain the tax benefits of the unified estate- and gift-tax credit or to properly utilize the marital deduction.

Business interests: The full amount of estate tax is generally due nine months after an individual’s death. However, there is special estate-tax relief available for a family that inherits an interest in a small business. If the estate qualifies, the executor can elect to pay no tax on the business interest for up to five years. After that, the payments can be stretched out over a period as long as ten years.

We have only touched on a few of the ways an executor can make a difference for your family. Choose someone who is experienced in financial matters and familiar with your personal situation. When in doubt, it is usually best to utilize the services of a professional.