The Numbers Are Sobering

Let's start with the reality:

70% of people over 65 will need some form of long-term care. This isn't about the unlucky few—it's the statistical majority.

The average nursing home stay is 2.5 years. But many people need care for 5+ years, especially with cognitive decline. Alzheimer's patients often require 8-10 years of care.

Medicare doesn't cover it. Medicare pays for skilled nursing care after a hospital stay—but only for about 100 days. After that, you're on your own. Most people don't know this until they need it.

Medicaid covers it—but only after you're impoverished. To qualify for Medicaid, you typically need to spend down nearly all of your assets first. That's not a plan; that's a catastrophe.

Why "Self-Insuring" Is Riskier Than You Think

Many wealthy families assume they'll just pay for long-term care out of pocket. "We have enough assets—we don't need insurance." This sounds logical, but it ignores several realities:

The timing of care is unpredictable. If you need care at 72 instead of 88, you're drawing down assets for 15+ years instead of 5. That changes everything about whether your money lasts.

Both spouses might need care simultaneously. Many couples assume one will care for the other. But if both develop dementia—or if the healthy spouse has a stroke while caregiving—you're suddenly paying for two facilities at once. That's $200,000-$300,000 per year.

Care costs inflate faster than investments grow. Long-term care costs have increased 4-5% annually for decades. If you're planning to self-insure, your assets need to grow faster than care costs—while also providing income for the healthy spouse.

Self-insuring depletes the estate. Every dollar spent on care is a dollar that doesn't pass to your children or charity. Some families are fine with that. Others want to protect a legacy—and that requires planning.

Long-Term Care Insurance: The Options

Traditional long-term care insurance (LTCI) has gotten expensive and complicated. Premiums have risen dramatically, and many insurers have exited the market. But it's not the only option anymore.

Traditional Long-Term Care Insurance

You pay annual premiums; if you need care, the policy pays a daily or monthly benefit. The pros: comprehensive coverage, potentially high benefit amounts, and premiums may be tax-deductible. The cons: premiums can increase significantly over time (they have for many policyholders), and if you never need care, you've paid for something you didn't use.

Hybrid Life Insurance/LTC Policies

These combine life insurance with long-term care benefits. If you need care, the policy pays for it. If you don't, your heirs get a death benefit. If you change your mind, you can often get your premium back. The pros: guaranteed premiums (they can't increase), you or your beneficiaries get something either way. The cons: typically require a large lump-sum premium ($100,000+), and benefit amounts may be lower than traditional LTCI.

Annuities with LTC Riders

Some annuity products include long-term care benefits. If you need care, the annuity pays out an enhanced benefit. If you don't, you get annuity income. These can be attractive for people who already wanted an annuity and want to add LTC protection.

Short-Term Care Insurance

A newer product that covers the first year or two of care—often the most expensive period. Premiums are lower than traditional LTCI, and it can bridge the gap between self-insurance and full coverage. The limitation: it won't cover a 5-year nursing home stay.

Asset Protection Strategies

Beyond insurance, there are legal strategies to protect assets from long-term care costs—though they require planning years in advance.

Irrevocable Trusts

Assets transferred to an irrevocable trust are generally not counted for Medicaid eligibility—but only if the transfer happened more than 5 years before you need care (the "look-back period"). This requires giving up control of the assets, so it's not right for everyone. But for families with significant wealth who want to preserve it for the next generation, it's a powerful tool.

Spousal Protection Rules

Medicaid has rules to prevent the "community spouse" (the one not in the nursing home) from being impoverished. The community spouse can keep certain assets and income. Understanding these rules—and positioning assets correctly before a health crisis—can protect significantly more than most people realize.

Medicaid Compliant Annuities

In some situations, converting countable assets into an income stream for the community spouse can help the ill spouse qualify for Medicaid while preserving wealth for the family. These strategies are complex and state-specific, but they can be valuable in a crisis.

The Home Care Alternative

Not everyone ends up in a nursing home. Many people receive care at home—from family members, home health aides, or a combination. Home care is often less expensive than facility care, but it's not free:

Professional home care costs $25-$35 per hour. For someone who needs 8-12 hours of daily assistance, that's $70,000-$150,000 per year—comparable to a nursing home.

Family caregiving has hidden costs. Adult children who provide care often sacrifice income, career advancement, and their own retirement savings. The "free" care isn't free—it's just paid by someone else.

Home modifications add up. Wheelchair ramps, stairlifts, walk-in tubs, medical equipment—making a home safe for an aging person can cost $20,000-$50,000.

The best plans account for home care as a first step, with facility care as a backup if needs increase.

When to Start Planning

The best time to plan for long-term care is in your 50s or early 60s—while you're still healthy enough to qualify for insurance, young enough to benefit from lower premiums, and far enough from needing care that asset protection strategies have time to work.

If you're already in your 70s, options narrow but don't disappear. Hybrid policies may still be available. Asset repositioning can still help. And having a plan—even if it's "we'll self-insure up to $X and then apply for Medicaid"—is better than no plan at all.

Protecting the Estate While Providing Care

For families who want to preserve wealth for the next generation, the key is treating long-term care as a risk to be managed—not an inevitability to be ignored.

Start with the numbers. How much can you afford to self-insure? If you could comfortably spend $300,000 on care without affecting your spouse's lifestyle or your legacy goals, you might not need full coverage. But if spending $300,000 would devastate your plan, you need to transfer that risk.

Consider insurance for catastrophic coverage. You don't necessarily need a policy that covers 100% of costs from day one. A policy with a longer elimination period (90-180 days) and a high daily benefit can protect against the truly devastating scenarios while keeping premiums manageable.

Coordinate with your estate plan. If you're using irrevocable trusts for estate tax purposes, those same trusts might provide Medicaid protection. If you're leaving assets to children, consider whether those transfers should happen now (with a 5-year look-back cushion) rather than at death.

Involve an elder law attorney. Medicaid rules are state-specific and change frequently. General financial advisors (including us) can model scenarios and recommend strategies, but the legal implementation requires specialized expertise.

What We Do

Long-term care planning isn't something we bolt on at the end of a financial plan—it's woven into everything we do. When we model retirement income, we stress-test it against care scenarios. When we discuss estate planning, we consider how care costs could affect inheritances. When we evaluate insurance options, we consider your family history, health status, and risk tolerance.

We work with elder law attorneys who can implement asset protection strategies. We analyze insurance proposals from multiple carriers. We help families have the difficult conversations about what care should look like and who should provide it.

If you've been avoiding this topic because it feels overwhelming—or because you're not sure where to start—let's talk. A single conversation can clarify your options and give you a path forward.