Is Long-Term Care Insurance a Viable Asset Protection Tool?

As an attorney, you work with clients to safeguard their wealth and ensure their estate plans align with their long-term goals. One critical but often overlooked component of asset protection is long-term care insurance (LTCI). With nursing home costs exceeding $100,000 per year in many states, a long-term care need can rapidly erode a client’s savings. Without a plan in place, they may be forced to spend down their assets to qualify for Medicaid, leaving less to pass on to their heirs.

Read More: The Impact of Inflation on Long-Term Care Costs and Estate Planning

How LTCI Protects Assets

LTCI provides a structured way to cover the cost of long-term care services, including in-home care, assisted living facilities, and nursing home stays. LTCI helps clients maintain financial independence while securing the care they need, including assistance with activities of daily living. This insurance is particularly valuable for individuals who want more control over their care options, as it allows them to choose where and from whom they receive care and avoid the restrictions associated with Medicaid-funded care.

Without LTCI, clients risk depleting their personal savings to cover long-term care costs. Those with significant assets may assume they can self-fund their care, but this approach can be risky, especially if they need care for an extended period. A well-structured LTCI policy can help clients:

• Protect their retirement savings
• Preserve their estate
• Avoid becoming a financial burden on their loved ones

When to Apply for LTCI

For LTCI to serve as an effective asset protection tool, clients must plan ahead. Underwriting is a key factor—most policies require applicants to be in relatively good health at the time of application. The best time to apply is typically in their 50s or early 60s (or earlier), before significant health issues arise. Waiting too long may result in higher premiums, limited benefits, or even a complete denial of coverage. By discussing LTCI early in the estate planning process, you can help clients make informed decisions that align with their financial and healthcare priorities.

Alternatives to Traditional LTCI

In some cases, traditional LTCI may not be the best fit. Some clients may be interested in exploring hybrid policies that combine life insurance with a long-term care benefit or annuity-based LTCI, both of which offer additional flexibility. These policies ensure that if long-term care is never needed, the funds can be passed on to beneficiaries as a death benefit. Clients with significant liquid assets may also consider self-funding their care, but this approach requires careful planning to ensure their estate remains protected.

For clients who can no longer qualify for LTCI due to age or health concerns, there are still ways to protect their assets from the high cost of care. For example, a Medicaid Compliant Annuity or funeral expense trust can play a role in preserving wealth in crisis situations while ensuring clients receive the care they need.

Read More: Why Use LTCI?

Integrating LTCI into Asset Protection Planning

Long-term care planning is an essential component of asset protection, and LTCI remains one of the most effective ways to safeguard a client’s financial future. By integrating LTCI into estate and financial planning discussions, attorneys can help clients proactively prepare for potential long-term care needs while ensuring their wealth is preserved for future generations.

If you’d like to explore LTCI and other asset protection strategies for your clients, we invite you to schedule a call with us to discuss the best solutions available.