Estate planning is just a technical term for arranging what happens to your property after your death, as well as planning for your financial affairs in the event you become incapacitated. That’s why everyone needs a basic estate plan -- no matter how old you are or what your net worth is.

Here’s how to start your planning:

Get organized. For starters, organize all your financial files to take account of everything you own and everything you owe.

File your papers by category, such as savings accounts, life insurance, and IRAs. Getting your records in order is an essential step in your planning and will also give your family easy access to important records when they need them.

As you file your papers, weed out old documents such as expired insurance policies that have no possibility of claims, outdated mutual fund annual reports, and records from vehicles you no longer own.

Next, look through your records to find what important information you're missing. For example, make sure you have all your current investment statements, insurance policies, and retirement plan information.

Calculate your net worth. Once your files are in order, create a net worth statement. The best way to do this is to enter your information into a personal finance software program. That way you'll be able to easily update your information and keep track of your situation.

For your assets, include the current value of your home, vehicles, personal property, savings, investments, retirement accounts, and any life insurance cash values or any other assets.

For your liabilities, include any mortgage, credit card balances, loans against life insurance policies or other outstanding debt. Then see where you stand by subtracting your liabilities from your assets.

Prepare for the possibility of incapacity. Create or update three documents that are essential if you become temporarily or permanently incapacitated.

A durable power of attorney for finances allows you to designate someone you trust to manage your financial affairs. A durable power of attorney for health care allows you to appoint someone to make decisions about your medical treatment. And a living will spells out your wishes regarding the use of life-sustaining procedures.

Without these documents a court may have to intervene in your personal affairs if you become incapacitated. Check with an estate planning attorney for information or check if your state Department of Health has ready-to-use forms.

Consider possible disability and long-term care needs. Review your disability income insurance to determine if you’re adequately covered, or look into obtaining coverage if necessary.

Next, check into long-term care insurance. Neither Medicare nor Medigap pay for most long-term care, and to qualify for Medicaid you have to spend down most of your financial resources.

Most long-term care policies issued today offer coverage options for all level of care – skilled, intermediate, and personal – in varied settings, including nursing facilities, assisted living facilities, adult day care centers, hospice facilities, and at home. Whether you're a candidate for coverage depends on your age, assets, income, health, and personal situation.

Review your life insurance needs. If anyone depends on your income, make sure you have adequate life insurance coverage. In addition to providing essential support to your survivors, life insurance proceeds are not subject to income tax. A policy’s proceeds, however, are generally subject to estate taxes (unless an irrevocable trust owns the policy and is the beneficiary of the policy).

Also consider any special needs you have for life insurance. For instance, if you have significant assets a life insurance policy can provide cash to pay any estate taxes owed so your beneficiaries won’t be forced to sell valuable illiquid assets.

Article is for educational purposes only and is not intended to provide specific tax or legal advice. For answers to tax questions, please see your tax professional. For legal questions, consult an attorney.

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