There's no negating the importance of establishing an estate plan. Whether your net worth is gargantuan or whether you're living paycheck to paycheck, it's critical that you have at least a basic estate plan in place. Doing so will ensure that your financial goals are met after you pass away. This kind of financial planning can provide payment of your debts, education or trust funds for your children, and much more.

Estate planning has the primary purpose to determine what you want done with your 'estate' after you die. In addition to that, effective estate planning can offer the following benefits:

* Ensure that you remain in control of the distribution of your assets
* Protect any wealth from expensive estate taxes
* Ensure that your family is taken care of after you die
* Avoid the complicated and expensive probate process
* Outline the care you want and oversight of your affairs should you become incapacitated
* Allow you to create special trusts for loved ones or organizations you care about

Below are some guidelines on how to get started.

Components of an Estate Plan

Your estate plan will include a will, copies of all financial documents, a durable power of attorney, and a health care proxy.

Factors to Consider

Before you can really start to lay out your plan, you'll have a lot of thinking to do. Some of these factors will vary a bit depending on how large and complex your estate is, and what stage of life you are in. For example, if you are young enough to have small children, you must determine who would care for and raise your children if you should die. If you are married, you and your spouse must discuss how assets should be distributed if one of you should die. You'll have to decide who will receive your life insurance when you pass away. You'll also have to consider who should care for you if you become unable to care for yourself. This part of the process involves much discussion with loved ones and much tough decision-making.

Get Your Plan Together

After having gathered copies of all financial documents including life insurance policies, all bank and investment account information, all debt information, you can reasonably estimate how much you'll have left over to leave to loved one. List all assets and liabilities. Your liabilities will have to paid at death. What's left over is what will be distributed between your heirs.

Write your will according to the amount you estimate will be left over. In addition to leaving money to loved ones, you can make contributions to charitable organizations. You can also lay out conditions for receiving the cash. Once you have established your will and basic estate plan, you're ready to move on to the next step.

Formalizing Your Estate Plan

Once you feel comfortable with the will you have put together, make sure to notarize the documents with at least two witnesses present. Keep in mind that no beneficiary should serve as a witness. Next, you'll want to name an executor who will be in charge of making sure that your final wishes are met. Make sure the person you name as executor is willing to do the job and is someone you trust. In many cases, attorneys or other impartial parties are named as executors.

Review and Re-review Your Plan

After you've drawn up and formalized an estate plan, you might think you're all set. Unfortunately, that's not the case. Unless you know that you will be passing in a short amount of time, it is important to go back and review your estate plan every few years. Many factors can change over the years which might require some basic adjustments to your estate plan.