Protecting Your Estate from Long-Term Care Costs

Most of us prefer not to dwell on the possibility of needing long-term care at some point. Yet even for wealthy families, an unexpected healthcare event requiring long-term care can quickly drain assets that might otherwise have provided a legacy for your family.

According to the U.S. Department of Health and Human Services, approximately 70% of Americans who are currently age 65 or older will need some type of long-term care (e.g., nursing home stays, home health care and/or time in an assisted-living facility)—costs that are not covered by Medicare.^{Disclosure 1}

Rather than paying out-of-pocket, you may want to consider offloading some of the risk (for you and/or your spouse) by purchasing a life insurance policy that also offers long-term care benefits. With traditional long-term care insurance, there’s a very real possibility that you could pay years of premiums without ever needing benefits. Essentially, you get nothing back in return. But many life insurance policies will also offer optional long-term care riders to policyholders who are generally in good health.

There are two different types of policy riders commonly available:

• Permanent life insurance with a long-term care benefits rider geared towards individuals whose principal focus is on maximizing the death benefit paid to their heirs, but would also like some long-term protection; and
• Hybrid life insurance with a long-term care benefits rider designed for individuals who might want greater flexibility in purchasing additional coverage and/or paying premiums.

With both of these policies, if you need long-term care coverage, it’s paid for out of the policy’s death benefit according to a pre-determined payment schedule. Any unused is then transferred tax-efficiently to your heirs upon your death.

Integrating long-term care into your wealth plan

An unplanned long-term care event can throw a wrench into an otherwise carefully-crafted estate and wealth transfer plan. It could mean having to sell off illiquid assets (such as a family business) at below market prices. Or it could require the sale of investments that trigger adverse tax consequences.

This is why, regardless of your preferred approach to funding long-term care expenses, it’s essential to plan early. Much like retirement planning, the sooner you begin, the more options and flexibility you’ll have and the greater your likelihood of achieving a successful outcome.

Your Truist Wealth advisor can assist you in estimating just how much you may need to cover out-of-pocket healthcare costs in retirement (including the costs associated with long-term care) and reviewing the various long-term care protection options.