Will Long-Term Care Costs Drain Your Wealth? How to Protect Your Assets Now

Imagine watching your aging parent struggle to afford the care they desperately need, their hard-earned savings draining away faster than expected. Or perhaps you're looking ahead at your own future, wondering if decades of financial discipline will be enough to protect your income and assets from the consequences of aging and long-term care.

Long-term care services can be financially devastating if you're unprepared. The median annual cost for a home health aide is $65,757, assisted living and memory care cost more, and a private room in a nursing home averaged $125,447, according to the LTC News Cost of Care Calculator, which surveys the cost of care nationwide. These figures continue to rise, making it critical to plan ahead.

Many people planning for retirement and retirees themselves underestimate their future healthcare expenses and often ignore the most likely problem: long-term care.

Many retirees carefully plan for their golden years but often underestimate the one expense most likely to impact their future—long-term care. Ignoring it doesn't make it disappear; planning for it ensures dignity, choice, and financial security.

If you lack a financial strategy, Medicaid may become your only option. But qualifying for Medicaid requires you to have limited financial resources. As of 2025, a single applicant can typically keep only $2,000 in countable assets to qualify. Without proactive planning, you could be forced to spend down your savings, potentially leaving little behind for your loved ones.

Plus, Medicaid limits your access to quality care by restricting you to approved providers. If you have income and assets, relying on Medicaid is neither the best option nor a true solution for long-term care.

So, what happens to your home, savings, and investments when you need long-term care? Let's explore your options.

Selling Your Home: A Necessary Sacrifice?

For many, the family home is the largest asset. When faced with long-term care expenses, selling the home can provide the necessary funds. Selling it may seem like the most straightforward way to cover care costs, but there are critical factors to consider:

• Medicaid Rules: Medicaid does not count your primary residence as an asset if you intend to return home or have a spouse living there. However, selling the home converts it into cash, which then becomes a countable asset—potentially disqualifying you from Medicaid until you spend down the proceeds.
• Emotional and Practical Concerns: Selling a lifelong home can be an emotional burden. Additionally, the selling process—appraisals, repairs, and finding a buyer—takes time and effort.
• Alternative Options: Instead of selling, you could rent out the property for additional income or take out a reverse mortgage to access funds while maintaining ownership. Consulting a financial advisor can help determine the best path.

Your home and assets represent a lifetime of hard work and memories—being forced to sell them to cover long-term care costs can be financially and emotionally devastating. Planning ahead ensures you keep control of your future without sacrificing everything you've built.

Trusts: Not the Best Solution for Most People Seeking Control and Independence

While trusts can be a tool for estate planning, they are often not the best choice for those who want control, independence, and access to quality care. Instead, for individuals with assets, a Long-Term Care Insurance policy provides a guaranteed, tax-free benefit to cover care costs in any setting—without sacrificing financial security or personal choice.

Why Trusts Fall Short for Long-Term Care Planning

• Irrevocable Trusts: Assets placed in an irrevocable trust are no longer under your control and may help with Medicaid eligibility. However, Medicaid's five-year look-back period applies, meaning this strategy may not be effective if you have significant savings or need care sooner than expected.
• Revocable Trusts: These trusts allow you to maintain control of your assets but do not protect them from long-term care expenses or Medicaid eligibility calculations. They are primarily used for estate planning, not for covering care costs.

A Better Solution: Long-Term Care Insurance

For most people, adding Long-Term Care Insurance is a more effective and flexible strategy. It:

• Provides guaranteed, tax-free benefits to pay for quality care in any setting—home, assisted living, or nursing care.
• Protects your assets while ensuring you receive the best-extended care options available.
• Maintains your independence, so you're not forced to rely on Medicaid or liquidate assets to cover care costs.

Rather than locking away your assets in a trust and losing control, Long-Term Care Insurance allows you to plan proactively, ensuring financial security, freedom of choice, and peace of mind for both you and your family.

Long-Term Care Insurance isn’t just a policy—it’s a plan for financial security, personal freedom, and peace of mind. By preparing now, you ensure that both you and your family have the care, choices, and stability you deserve in the future.

Long-Term Care Insurance is often the best and most affordable solution for long-term care planning, but it's important to act early:

• Buy Young, Pay Less: The earlier you purchase a policy, the lower the premiums.
• Coverage Options: Policies vary in benefits, including daily or monthly payouts, duration of coverage, and inflation protection.
• Hybrid Policies: These are insurance policies that include life insurance and long-term care, allowing policyholders to receive tax-free long-term care benefits,m or receive the death benefit.

A 2023 report from the American Association for Long-Term Care Insurance found that individuals who purchased LTC Insurance before age 55 paid 40% less than those who waited until age 65.

• How Much Does Long-Term Care Insurance Cost at My Age?

Since your health determines eligibility, it's essential to secure coverage before significant health changes occur. Every insurance company has its own underwriting rules, so consult a qualified Long-Term Care Insurance specialist who works with multiple top-rated insurers to find the best solution for your needs.

• Consumer Choice - Find Quotes for Long-Term Care Insurance

Annuities: A Reliable Income Stream

Certain annuities can provide income and protect assets while ensuring Medicaid eligibility. If you or a loved one have not planned in advance, an annuity can be a solution.

• Medicaid-Compliant Annuities:

• Convert assets into an income stream for a healthy spouse, allowing the institutionalized spouse to qualify for Medicaid.

• Must be irrevocable and non-transferable to meet Medicaid guidelines.

• Annuities with Long-Term Care Riders:

• Some annuities offer enhanced payouts when long-term care is needed.

• These can be a good alternative for those not qualifying for traditional LTC Insurance.

It is essential to understand fees, payout structures, and tax implications.

Life Insurance: More Than Just a Death Benefit

Many people overlook the potential of their current life insurance policy for funding long-term care.

Consider these options:

• Accelerated Death Benefits (ADB):

• Allows you to access part of your death benefit if diagnosed with a chronic illness. These are not regulated like LTC Insurance, but if you have a life insurance policy with a chronic illness rider, you have some benefit available if you are unable to obtain a qualified LTC policy.

• Life Settlements:

• You can sell your policy to a third party in exchange for a lump sum. However, this can have tax consequences and may affect Medicaid eligibility.

• Policy Conversions:

• Some policies can be converted into Long-Term Care Insurance by using a 1035 tax-free exchange, offering you both life insurance and qualified long-term care benefits.

The Medicaid Spend-Down: Can You Avoid Losing Everything?

If your assets exceed Medicaid's eligibility limits, you must spend down assets before qualifying. Again, Medicaid is not the best solution for long-term care; however, depending on health and finances, it could be a solution to consider,

However, not all spending is equal:

• Permissible Spend-Down Strategies:

• Paying off debts or mortgages

• Prepaying funeral expenses

• Purchasing exempt assets like a new car or home improvements

• Setting up a Medicaid-Compliant Annuity

• What Not to Do:

• Gifting assets without proper planning can trigger Medicaid's look-back penalty, delaying eligibility for up to five years.

A Medicaid planning specialist can help structure your finances to meet eligibility requirements without unnecessary loss of assets.

Future of Long-Term Care Costs: What You Need to Prepare For

Long-term care costs continue to rise, and government programs like Medicare (that pays for short-term skill care) and Medicaid face increasing pressure. Policy changes could alter eligibility rules, making private planning more essential than ever.

The solution? Start planning for long-term care with your retirement planning now. Long-Term Care Insurance can mean the difference between quality care and financial security and losing your assets to long-term care costs.

Learn more about long-term care planning by using the LTC News Long-Term Care Insurance Education Center.

Don't leave your future to chance. Speak with a qualified Long-Term Care Insurance specialist to help you determine the best options and shop for the best coverage at the lowest cost.

You will find that LTC Insurance is very affordable, especially when you obtain coverage when you are younger and healthier.