Long-term care planning for high-net-worth families

"We can just pay for it" — and why that's the trap

With a $2 million-plus net worth, three or four years of care — even at today's six-figure annual costs — is clearly affordable on paper. That's exactly why many affluent families skip the conversation. But affording care and funding it efficiently are two very different things.

Most significant wealth isn't sitting in cash. It's in real estate, concentrated or appreciated stock, a business, annuities, and retirement accounts — assets that are either illiquid or costly to unwind. When a long care event demands hundreds of thousands of dollars over several years, you have to create the liquidity to pay for it, and that's where the damage happens.

The long-term care liquidity trap

Raising that cash from a HNW balance sheet usually means one of the following — each with a hidden cost:

• Selling securities at a possibly inopportune time (sequence-of-returns risk), and paying capital-gains tax on appreciated positions.
• Drawing down retirement accounts, where every dollar withdrawn is taxed as ordinary income — often pushing you into a higher bracket in the very years you're also paying for care.
• Selling real estate or a business interest under time pressure, rarely at full value.
• Reducing the income and estate the healthy spouse and heirs were counting on.

Paying taxes and taking investment losses just to fund care is the trap. It's not that the money isn't there — it's that getting to it is expensive.

Why asset-based coverage fits affluent families

This is where asset-based (hybrid) coverage is especially powerful for high-net-worth households — not as "insurance you might waste," but as a portfolio and estate strategy:

• Reposition an idle asset. Move a CD, an underused annuity, or a cash-value life policy — often via a tax-free 1035 exchange — into a policy earmarked for care.
• Leverage. That repositioned asset typically buys a substantially larger pool of long-term care dollars than the same money sitting in the account would provide.
• Tax-efficient liquidity. Benefits for qualified long-term care are generally received income-tax-free, creating clean cash for care without selling anything or triggering a tax bill.
• Nothing is wasted. If you never need care, your heirs receive a death benefit — so the "use it or lose it" objection disappears.
• Guaranteed, often single-premium. Premiums are typically locked and can be paid in one lump sum, so there's no exposure to future rate increases.

Self-insure vs. insure: reframing the decision

The real choice for an affluent family isn't "can we afford care?" — it's "which dollars pay for it, and what do they cost to access?" Self-funding earmarks a large, tax-exposed slice of the portfolio for a risk you can transfer for a fraction of it, while keeping the rest invested and intact. Insuring converts an unpredictable, open-ended liability into a known, leveraged, and tax-advantaged asset — and preserves the estate and the surviving spouse's security.

Who this is for

This approach tends to fit families with roughly $1–5 million or more in assets, business owners, and anyone whose wealth is concentrated in illiquid or highly-appreciated holdings — especially those who care about leaving a legacy intact and protecting a healthy spouse. It's a conversation to have alongside your financial advisor, CPA, and estate attorney, since the right structure depends on your full picture.

General information only. This is educational and not insurance, tax, legal, or investment advice. Tax treatment and product features vary and change — confirm the specifics with your licensed advisors.