As high-net-worth individuals navigate the complexities of financial planning during their working years, one critical aspect often goes overlooked—long-term care. In 2021, the median monthly cost of a private room in a nursing home facility was more than $9,000 per month. At a rate of close to $100,000 per year, even the most diligent savers may struggle to afford the true price of long-term care.1 Here are a few things high-net-worth individuals should consider when planning for long-term care costs and how to manage their assets.
Customized Insurance Solutions
High-net-worth individuals often have needs that standard long-term care (LTC) insurance policies may not address. These policies may cover only a brief period of care and may have lifetime limits on coverage. Instead, you may need to investigate customized insurance solutions, such as hybrid policies that combine life insurance with long-term care benefits. These policies offer a safety net for potential care needs while using the funds for risk mitigation if long-term care is not required.
Health Savings Accounts
For those who are still in their earning years, health savings accounts (HSAs) offer a tax-advantaged way to save for future medical expenses, including long-term care. Contributions to an HSA are tax-deductible, and withdrawals for qualified medical expenses are tax-free, making an HSA popular as a savings and investment account.
Moreover, once you are 65, you may take penalty-free withdrawals from the HSA for any purpose.2 There is no penalty for withdrawals; however, withdrawals for non-medical expenses continue to be taxed as before. Accumulating funds in an HSA may serve as a strategic reserve for potential long-term care needs.
Investing in Home Modifications
One proactive investment involves adapting your home’s living spaces to accommodate potential future health challenges. High-net-worth individuals may consider allocating funds for home modifications, such as ramps, grab bars, or even smart home technologies that enhance safety and accessibility. These modifications might enable you to age at home more comfortably.
Long-Term Care Education and Planning
Knowledge is a powerful tool when it comes to long-term care planning. High-net-worth individuals should invest time and resources in understanding the intricacies of long-term care options, costs, and potential government assistance programs. By being well-informed, individuals may make decisions that align with their preferences and financial goals.
Trust Options
Establishing a trust that covers long-term care expenses is a potential strategic move. This trust may be funded over time, providing a designated pool of resources for possible future needs while also offering tax benefits. A well-structured trust may help manage assets efficiently.
Building a Team of Financial Professionals
High-net-worth individuals could benefit from assembling a team of financial professionals, estate planners, and elder care specialists. By drawing from a pool of talent and knowledge, you work to create a comprehensive understanding of your financial landscape and build a cohesive long-term care strategy that aligns with your broader financial goals.
Important Disclosures:
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.
All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
LPL Financial Representatives offer access to Trust Services through The Private Trust Company N.A., an affiliate of LPL Financial.
This article was prepared by WriterAccess.
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Footnotes
1 Cost of Care Survey
https://www.genworth.com/aging-and-you/finances/cost-of-care.html/
2 Changes to your HSA When You Reach 65
https://www.wellesley.edu/sites/default/files/assets/departments/humanresources/files/benefits/hsa_and_medicare_1.pdf