A long-term care policy can preserve your assets if you go into a nursing home. But what happens if:
you suffer from a stroke or Alzheimer’s disease or some other form of cognitive impairment;
you go into a nursing home; and
you are unable to transfer your assets to a loved one because you’re incapable of managing your affairs.
The above scenario is just one example of what can happen if you don’t plan for incompetency. Your assets may be squandered, your family may have to petition a court to appoint a guardian, and someone not of your own choosing may wind up with total control over your life.
A thoughtful plan can help prevent such occurrences. Such plans aren’t only for yourself and your spouse: if one or both of your parents is alive, you might suggest the steps described below. The easy way to plan for incompetency is to put assets in joint name so either co-owner can act individually, if the other becomes incapacitated.
Putting a bank, brokerage, or mutual fund account in joint name is simple and inexpensive. If one party becomes incompetent, the other party can pay bills, move money, handle investments, etc.
However, there are some disadvantages:
- You lose control over jointly-held assets because the co-owner has equal access to them.
- You lose flexibility in estate planning. If you add your daughter Alice’s name to your bank account she’ll be the one who’ll inherit the entire amount; you can’t leave this account (or any portion of it) to anyone else.
- The younger owner’s creditors may have access to the account, even though the assets really belonged to a parent or another older relative.