Why Long-Term Care Planning Matters to Your Client’s Financial and Estate Plan

An effective plan for the future goes far beyond controlling and directing asset transfers at death. When structured properly, an estate plan also protects against incapacity during life, ensuring that a client’s medical and financial affairs can be managed without court intervention.

But one risk that many estate plans overlook is the potential need for long-term care (LTC). Long-term care is not a hypothetical risk; it is a predictable financial challenge that can upend a carefully crafted estate plan, drain savings, and place immense strain on families.

Unfortunately, clients often assume that they will not need care, and advisors frequently delay planning until a health crisis strikes. Treating the need for long-term care solely as an unlikely health risk rather than a predictable financial and estate planning vulnerability leaves plans dangerously exposed, potentially compromising assets and long-term objectives, even if the client regains their health.

Understanding Long-Term Care

To appreciate the risk that long-term care poses to an estate plan, it is helpful to review a few key considerations that may not have been fully addressed or considered with your clients.

What Is Long-Term Care?

Long-term care differs from standard incapacity planning because it is not necessarily tied to catastrophic injury, terminal illness, or total cognitive or physical loss. Instead, LTC addresses  functional dependency and the inability to perform basic activities of daily living (ADLs), including bathing, dressing, and moving safely from place to place. It typically encompasses the following types of care:

• In-home care
• Assisted living
• Memory care
• Skilled nursing facilities

The National Institute on Aging defines LTC as services designed to meet a person’s health or personal care needs when they can no longer independently perform everyday tasks.^[1]

Unlike short-term rehabilitation, LTC is generally custodial, focused on sustained assistance that may last months or years.

That distinction has important financial implications: Medicare generally does not cover long-term custodial care.^[2] While it may pay for limited, short-term skilled nursing or rehabilitation following hospitalization, ongoing support for ADLs typically falls to clients, their families, or private insurance.

Who Typically Needs Long-Term Care?

According to the National Institutes of Health, the need for LTC can arise suddenly, such as after a heart attack or stroke, but more often develops gradually with age.^[3] While the exact timing and level of care that will be needed are difficult to precisely predict, the following underlying causes are relatively common and generally more foreseeable:

• Age-related frailty and declining mobility
• Cognitive impairment, including Alzheimer’s disease or other forms of dementia
• Stroke and neurological conditions such as Parkinson’s disease
• Chronic illnesses such as diabetes or heart disease
• Injuries resulting in long-term functional limitations

As life expectancy increases, so does the likelihood of requiring care.

The U.S. Department of Health and Human Services estimates that nearly 70 percent of individuals turning age 65 today will need some form of long-term care during their remaining years.^[4]

Women are more likely to require care for longer periods due to longer life expectancy—a factor that has implications for retirement and estate planning.

How Long Does Long-Term Care Normally Last?

Long-term care is not always permanent, but it is often prolonged. The average duration for individuals needing care is approximately three years.^[5] However, averages can obscure the more significant risk: Roughly one in five individuals requiring care will need it for five years or longer.^[6]

From an advisory standpoint, duration matters. A short-term rehabilitation stay is one scenario, but a multiyear period of dependency—especially when it coincides with retirement withdrawals or limited income—can have material implications for both cash flow and estate planning.

What Does Long-Term Care Cost?

Costs vary by region and level of care, but national median estimates provide perspective^[7]:

• The annual national median cost of a semiprivate nursing home room is about $114,975; a private room is about $129,575.
• Assisted living community care averages roughly $74,400 per year.
• Home-based care such as a home health aide runs around $35 per hour

These figures represent median costs at typical facilities and do not account for inflation, specialized memory care, or ancillary medical expenses. In higher-cost states such as California, rates can be significantly above the national median.^[8]

Care costs continue to rise rapidly as labor costs and demand grow. For example, assisted living costs increased about 10 percent compared with the last year surveyed.^[9] Even modest annual increases can compound significantly over multiyear stays.

How Can Costs Affect Savings?

Long-term care can have a significant impact on a client’s financial plan. Even a few years of private-pay care can redirect assets toward care expenses, potentially reducing funds available for retirement income, lifestyle goals, or legacy planning.

To put this in perspective:

• Nursing home care can easily cost hundreds of thousands of dollars over several years.
• Assisted living or graduated care facilities can be expensive and can consume a material portion of savings.

For many retirees, savings are intended to fund ongoing living expenses, supplement Social Security, and ultimately pass to heirs. Extended LTC expenses can quickly divert these assets, creating risk to both retirement and estate planning objectives.^[10]

Why Traditional Estate Plans Do Not Address LTC Risk

Most estate plans are structured to achieve the following goals:

• Facilitate and direct asset transfers at death
• Minimize certain taxes
• Provide authority for medical and financial decisions during incapacity

However, these tools often assume that assets remain largely intact until death. LTC can introduce a lifetime risk that can quickly erode or deplete those assets, and standard estate planning documents are often not enough.

• Wills. Take effect only at death and provide no protection against LTC costs during life
• Revocable living trusts. Centralize asset management and avoid probate, but assets remain exposed to private-pay long-term care expenses
• Durable powers of attorney. Grant decision-making authority but do not shield assets from care costs

Even a well-constructed estate plan can be compromised if long-term care is not addressed. For advisors, the implication is clear: Integrating LTC planning into the broader estate and financial plan is essential to help clients preserve assets, protect spousal income, and maintain legacy intentions.

 

 

 

 

 

Strategies to Help Clients Protect Their Assets If Long-Term Care Is Needed

Long-term care needs can introduce significant risk to a client’s estate and financial plan. Advisors should take a layered approach, integrating strategies that address private-pay options and potential public benefits while preserving client objectives.

Not all long-term care risks or planning needs are the same, so asset protection strategies must be evaluated in the context of a client’s health, family, and broader estate, financial, and legacy goals while maintaining flexibility to navigate the uncertainties of long-term care and the current economic environment.

What Are the Goals of Long-Term Care Planning?

The effectiveness of a long-term care (LTC) plan is measured by how well it achieves the client’s objectives. Advisors typically have the following key goals:

• Protect a spouse’s standard of living. Ensure that one partner’s long-term financial security is not compromised by the other’s long-term care needs
• Preserve legacy intentions for heirs. Help clients maintain intergenerational wealth and fulfill estate planning objectives despite potential long-term care expenses
• Maintain care choices and independence. Equip clients with the financial flexibility to dictate the terms, setting, and style of their care, ensuring that their independence remains intact
• Integrate LTC planning with retirement and investment strategy. Consider LTC risk alongside asset allocation, withdrawal strategies, and broader financial goals
• Minimize reliance on family. Reduce the financial, emotional, and logistical burden on family members by planning proactively

What Are the Main LTC Planning Strategies?

Planning for long-term care requires creating a clear strategy to protect a client’s savings from the high costs of in-home help, assisted living, or nursing homes. While some steps may look similar to setting up a standard will or trust, planning for long-term care demands a distinct focus. Advisors and clients must separately evaluate these risks and choose specific solutions to ensure ongoing financial security.

Transfer Private Risks to Policies

Traditional long-term care insurance (LTCI) and hybrid life policies allow clients to shift the heavy burden of care costs away from their personal savings. By transferring this risk to an insurance company, clients gain a dedicated safety net and enjoy the following key benefits:

• Shielding retirement funds and investment accounts from sudden, forced sales
• Securing a pool of money for care that often far exceeds the premiums paid
• Establishing a predictable and reliable source of funding during an extended health event

However, LTCI is not a universal solution. Underwriting requirements, premium stability, long-term affordability, and policy structure must all be carefully evaluated. For clients who qualify and are able to afford premiums, these policies can meaningfully reduce asset exposure and serve as a key layer in a broader LTC planning strategy.

Self-Funding and Asset Management

Some clients elect to self-fund long-term care costs, which requires intentional asset positioning and coordination across the financial plan. Key considerations include the following:

• Designating LTC reserves. Set aside specific savings or brokerage accounts to cover potential care expenses
• Evaluating retirement account withdrawals. Sequence distributions to maintain liquidity and tax efficiency
• Maintaining sufficient liquidity. Ensure that clients can fund care without forced or ill-timed asset sales

Paying for care out of pocket is a strong option for clients who possess enough wealth to sustain multiple years of large expenses without putting their retirement lifestyle or family legacy at risk. To correctly execute this strategy, the advisory team must carefully align the client’s estate plan with their investment choices and expected income streams.

Public Benefits Planning

While Medicaid is the primary funding source for extended care, strict financial limits often force individuals to spend down their life savings before receiving help. By integrating public benefits into an overall financial strategy early, advisors can help clients secure necessary care while shielding private wealth. Important planning considerations include the following:

• Understanding exact financial limits and the strict timeline the government uses to review past financial gifts
• Restructuring wealth to seamlessly align with federal and state rules for asset transfers
• Utilizing specific regulations designed to protect the financial well-being of a healthy spouse

Proactively addressing these public benefit rules is essential. Reactive planning during a medical emergency severely limits the choices available to clients and creates significant financial vulnerability.

Asset Protection Structures

Irrevocable trusts and other asset protection strategies can insulate assets from potential long-term care spend-down, but they generally must be implemented well in advance.

Where appropriate, advisors may focus on the following:

• Proactive funding. Transferring assets into secure trusts well before an individual requires daily assistance
• Strategic structuring. Designing the trust to align perfectly with the strict eligibility guidelines of public benefit programs such as Medicaid
• Agent alignment. Coordinating financial power of attorney documents with the trust so that trusted agents can manage the protected funds safely and legally without breaking the protective seal of the trust

Effective asset protection planning requires early implementation and careful coordination. Timing is critical, and late-stage planning significantly limits available options and reduces planning flexibility.

Family Coordination

Long-term care often involves family coordination, whether for caregiving, decision-making, or managing eligibility for public benefits.^[11] Even if a spend-down is not sought and care funding remains private, LTC affects more than just the recipient. Advisors can help families prepare for long-term care in the following ways:

• Confirm decision-making authority. Ensure that all family members know exactly who is designated to make medical and financial decisions if the client becomes incapacitated.
• Define caregiving roles. Clearly establish who will provide hands-on, day-to-day support versus who will handle administrative tasks such as coordinating services.
• Communicate expectations. The client should openly discuss their care preferences and funding strategies so that everyone understands the overarching plan and their potential responsibilities.

Even the best financial and care strategies can falter if families are not on the same page. Proactive planning and coordination reduces uncertainty, minimizes conflict, and helps ensure that long-term plans work smoothly if and when care becomes necessary.

Right-Sizing LTC Planning

These long-term care strategies must be balanced with liquidity needs, control considerations, and overall estate planning objectives. Because LTC risk varies by client, each plan should be tailored to individual circumstances.

The broader picture can change over time as health, markets, or family circumstances shift. While plans may not need to be rebuilt from scratch, they may require periodic adjustments to maintain existing protections or implement new strategies.

When integrated early and reviewed regularly, LTC planning becomes a stabilizing element in a client’s estate plan, turning what could be a potentially disruptive risk into a manageable component of long-term wealth and legacy planning rather than a last-minute response to crisis.

 

 

 

 

Understanding Long-Term Care Insurance: Insights for Advising Your Clients

One way to manage long-term care risk is through a dedicated insurance policy. Long-term care insurance (LTCI) covers care at home or in assisted living, memory care, or nursing facilities—services that standard health insurance and Medicare do not typically pay for.

Although roughly 70 percent of people turning 65 will need some form of long-term care services in their remaining years, fewer than 5 percent of Americans aged 50 and older currently hold an LTCI policy.^[12] Why is the uptake so low?

Given the high potential costs of LTC, a policy may seem like an obvious solution. Yet the contraction of the LTCI market over recent decades highlights that it is a targeted planning tool. For advisors, therefore, it becomes important to identify which clients are appropriate candidates for LTCI and under what circumstances.

What to Know About LTCI: An Advisor’s Primer

Two major factors tell the story of LTCI over the years: price and complexity.

Long-term care insurance was created to bridge the gap left by Medicare for extended custodial care. Introduced in the late 1970s and 1980s in response to rising nursing home costs, LTCI later expanded to include home health and assisted living coverage.

Despite its original mass-market intent, the availability of traditional LTCI has shrunk dramatically, reflecting higher premiums, tighter underwriting, and fewer standalone offerings. Meanwhile, hybrid products have gained traction.

Advisors should be aware of five key trends:

• Decline of traditional LTCI. Most insurers have stopped selling standalone LTCI due to high costs and pricing challenges, prompting carriers to raise premiums or exit the market.^[13]
• Growth of hybrid or linked-benefit products. Combination life/LTC products now dominate the market,^[14] offering dual value: care protection and a death benefit. These products may appeal more to younger clients, especially family caregivers.
• Premiums and underwriting constraints. Conservative pricing and stricter health requirements make eligibility and long-term affordability central planning considerations.
• Coverage gaps. Many policies, especially older or narrowly designed ones, do not cover all the care clients may expect, leading to potential out-of-pocket expenses.
• Increased product complexity. Modern LTCI products vary widely in structure, benefits, and cost, meaning that advisors must understand differences and not assume policy parity.

These trends underscore that LTCI is a strategic planning tool, not a default solution that applies to every situation. It can complement trusts and other asset protection strategies, helping preserve wealth and reduce care-related stress for clients and their families. It is not a planning panacea for every client, however, and should be evaluated case by case.

Who May Benefit from LTCI

LTCI may be worth evaluating for a client in the following circumstances:

• Has meaningful savings to protect from the high costs of prolonged medical assistance
• Wishes to preserve their estate for heirs rather than liquidating assets for healthcare
• Wants to guarantee that one spouse’s health crisis does not ruin the financial security of the other
• Aims to keep their overall retirement and investment plans running smoothly without interruption
• Is healthy enough to secure an insurance policy and financially stable enough to pay the premiums over the long term

Who May Not Benefit from LTCI

LTCI may be less appropriate for a client in the following circumstances:

• Has limited income to support the burden of continuous, multiyear premiums
• Is actively positioning their assets to qualify for Medicaid and other public support
• Has already secured their estate through dedicated self-funding methods or trusts
• Cannot pass strict medical evaluations or cannot afford the high premiums associated with their current health status
• Prioritizes immediate financial freedom over dedicating funds to a future insurance benefit

 

LTCI Considerations for Advisors

Once suitability is identified, advisors must evaluate policy design in light of the client’s estate documents, asset structure, and retirement income strategy.^[15] These are some key areas to evaluate:

• Premium cost versus opportunity cost. Do projected premiums justify the expected benefit relative to alternative uses of capital or liquidity needs?
• Benefit duration. Does the policy’s benefit period align with realistic care timelines, including the possibility of multiyear or indefinite dependency?
• Inflation protection. Will benefits retain purchasing power over time? What if care is needed decades from now at rates far above today’s assumptions?
• Elimination periods. Can the client comfortably self-fund care during waiting periods before benefits begin?
• Policy flexibility and structure. Are benefit triggers, daily or monthly caps, and covered care settings aligned with how the client would realistically receive (or prefer to receive) care?
• Family dynamics. Can dedicated funding reduce stress on spouses or children who may face caregiving or financial decision-making pressure?
• Ongoing review. As health needs, markets, and family circumstances evolve, does the policy remain aligned with the client’s estate and retirement objectives?
• Coordination with legal planning. Does the policy complement existing trusts, powers of attorney, and asset protection strategies without duplicating or conflicting with them?

Building Long-Term Partnerships for Clients’ Long-Term Care

Long-term care is becoming an increasingly common reality as Americans live longer and retirement timelines extend past what many originally anticipated.

Changes in the LTCI market have introduced new products that can help address gaps in Medicare coverage and reduce reliance on family caregivers. But these solutions are not perfect and are far from one-size-fits-all.

Whether LTCI is right for a client comes down to careful analysis within the broader context of their financial, retirement, and estate plans. By approaching long-term care planning with a long-term perspective, advisors reinforce that they are at their clients’ side throughout the aging and retirement journey—whatever path it may take and whatever solutions it ultimately demands

Citations:

[1] What Is Long-Term Care?, NIH Nat’l Inst. on Aging (Oct. 12, 2023), https://www.nia.nih.gov/health/long-term-care/what-long-term-care.

[2] Long-Term Care, Medicare.gov, https://www.medicare.gov/coverage/long-term-care (last visited Mar. 30, 2026).

[3] What Is Long-Term Care?, supra note 1.

[4] How Much Care Will You Need?, LongTermCare.gov (Feb. 18, 2020), https://acl.gov/ltc/basic-needs/how-much-care-will-you-need.

[5] Id.

[6] Stephanie Stearns, How Long Does the Average Person Need Long-Term Care?, Nw. Mut. (Aug. 28, 2024), https://www.northwesternmutual.com/life-and-money/how-long-does-the-average-person-need-long-term-care.

[7] Calculate the Cost of Long-Term Care Near You, CareScout, https://www.carescout.com/cost-of-care (last visited Mar. 30, 2026).

[8] Long-Term Care Costs Increase in California, Exceeding National Costs, Nasdaq (Mar. 4, 2025), https://www.nasdaq.com/press-release/long-term-care-costs-increase-california-exceeding-national-costs-2025-03-04.

[9] Genworth and CareScout Release Cost of Care Survey Results for 2024, BusinessWire (Mar. 4, 2025), https://www.businesswire.com/news/home/20250301584443/en/Genworth-and-CareScout-Release-Cost-of-Care-Survey-Results-for-2024.

[10] Lillian Kafka, Average Retirement Savings by Age: How Do You Compare?, Transamerica (Oct. 7, 2025), https://www.transamerica.com/knowledge-place/average-retirement-savings-age-how-do-you-compare.

[11] Common Caregiving Problems, Am. Psych. Ass’n (June 2020), https://www.apa.org/pi/about/publications/caregivers/practice-settings/common-problems.

[12] Janet Weiner, Reforming Long-Term Care Policy: Lessons from the Past, Imperatives for the Future, Penn LDI (Dec. 4, 2025), https://ldi.upenn.edu/our-work/research-updates/reforming-long-term-care-policy.

[13] LIMRA, Hybrid Insurance on the Rise: A New Era for Long-Term Care Protection: LIMRA/EY US Individual Life Combination LTC Survey 2 (2025), https://www.ey.com/content/dam/ey-unified-site/ey-com/en-us/insights/insurance/documents/ey-hybrid-insurance-on-the-rise-a-new-era-for-long-term-care-protection.pdf.

[14] Is Life Insurance the Answer to the Growing Long-Term Care Need in the U.S.?, LIMRA (Aug. 28, 2025), https://www.limra.com/en/newsroom/industry-trends/2025/is-life-insurance-the-answer-to-the-growing-long-term-care-need-in-the-u.s.

[15] What Features of Long-Term Care Policies Should I Focus On?, Ins. Info. Inst., https://www.iii.org/article/what-features-long-term-care-policies-should-i-focus (last visited Mar. 31, 2026).