Preserving Generational Wealth Amid Soaring Long-Term Care Costs: Estate Planning Strategies for High-Net-Worth Households

The rising cost of long-term care (LTC) has become a critical challenge for high-net-worth households seeking to preserve generational wealth. With nursing home costs exceeding $114,000 annually in 2025 and projected to climb to $132,928 by 2030, the financial burden of aging is reshaping estate planning priorities. This article explores how affluent families can mitigate these costs while safeguarding assets through strategic legal and financial tools.

The Financial Realities of Long-Term Care in 2025

The median annual cost for a semiprivate nursing home room now stands at $114,665, while assisted living averages $72,924 annually. Geographic disparities are stark: Alaska's nursing homes charge over $31,000 monthly—more than triple the rate in Texas ($5,639/month). Even home health care costs vary widely, from $24/hour in Mississippi to $43/hour in South Dakota.

These figures underscore the urgency of proactive planning. For example, a 7-hour-per-week home health regimen costs $1,000/month, but 44 hours/week jumps to $6,292—a 529% increase. Such expenses can erode even substantial estates.

Estate Planning Strategies to Mitigate LTC Risks

High-net-worth households are deploying sophisticated tools to shield wealth from LTC costs while ensuring efficient generational transfers. Below are key strategies:

1. Trusts: The Cornerstone of Asset Protection

• Irrevocable Life Insurance Trusts (ILITs): These hold life insurance policies outside the estate, providing liquidity to cover taxes or debts without depleting inheritances. For instance, a $5 million policy funded via an ILIT could offset estate taxes triggered by LTC expenses.
• Dynasty Trusts: These bypass estate taxes across generations, preserving assets indefinitely. A family in Alaska, where LTC costs are highest, might use such trusts to shield assets from being drained by nursing home bills.
• Revocable Living Trusts: While not asset-protected during the grantor's life, these streamline asset distribution post-mortem, avoiding probate delays.

2. Asset Protection Through Legal Structures

High-net-worth individuals often use Limited Liability Companies (LLCs) or Family Limited Partnerships (FLPs) to insulate business assets from LTC-related liabilities. FLPs also allow discounted gifting of minority interests, reducing taxable estate values while transferring control gradually.

3. Tax-Efficient Wealth Transfer

• Annual Gifting: Leveraging the $19,000 per recipient annual exclusion (2025) to move assets into trusts or to heirs tax-free.
• Grantor Retained Annuity Trusts (GRATs): GRATs transfer appreciated assets to heirs by “freezing” their value. For example, a GRAT holding a family business could pass future appreciation tax-free, even as LTC costs rise.
• Charitable Vehicles: Charitable Remainder Trusts (CRTs) reduce taxable estates while generating income. A CRT funded with appreciated stock could provide cash flow to cover LTC costs while avoiding capital gains taxes.

4. Insurance as a Safety Net

Long-term care insurance (LTCI) remains critical for families unwilling to deplete assets. Pairing LTCI with an Irrevocable Care Trust ensures premiums are paid without depleting the estate. Meanwhile, life insurance policies held in ILITs provide liquidity to settle estate taxes, safeguarding inheritances.

5. Proactive Legal Directives

A Durable Power of Attorney (POA) ensures a trusted party can manage finances and healthcare decisions if incapacitation occurs, preventing costly mismanagement. A living will also avoids unnecessary interventions that might accelerate asset erosion.

Investment Considerations and Proactive Measures

• Trust Asset Allocation: Families should invest trust assets in low-volatility, high-dividend portfolios or real estate to generate steady income for LTC costs.
• Monitor Estate Tax Thresholds: The 2026 scheduled reduction of the estate tax exemption (currently $13.99 million) creates urgency to transfer assets now.
• Geographic Diversification: Owning property in states with lower LTC costs (e.g., Texas) or favorable asset protection laws (e.g., South Dakota) can reduce financial exposure.

Conclusion

The interplay of soaring LTC costs and estate tax risks demands a holistic approach to wealth preservation. High-net-worth households must integrate trusts, tax-smart gifting, and insurance into their planning to protect assets from both aging-related expenses and inheritance taxes. By acting now—before 2026's tax changes—families can ensure their legacy endures beyond the demands of long-term care.

Nick Timiraos is a financial analyst specializing in generational wealth strategies.