Long-Term Care Planning for $5M–$50M Households: Self-Insure or Insure?

At $5M+ investable, the typical LTC conversation changes. Medicaid planning is irrelevant — you have too many assets to qualify. The real question is whether self-insuring from your portfolio makes more financial sense than paying insurance premiums. The answer depends on your asset level, your risk tolerance, and what you're protecting.

What long-term care actually costs in 2025

The CareScout (formerly Genworth) 2025 Cost of Care Survey — data collected from providers nationwide in late 2025 — puts national median costs at:¹

These are national medians. Costs in high-cost states (California, New York, Massachusetts, Connecticut) run 30–60% above these figures. In lower-cost states (much of the Southeast and Midwest), costs can run 20–30% below. Most HNW households own real estate in high-cost metros, so the relevant number for planning is often closer to the high-cost scenario.

The statistical risk: what the data says

About 70% of adults who reach age 65 will need some form of long-term care services during their lifetime.² Roughly 20% will need care lasting five years or longer — the scenario that stresses even large portfolios. For perspective on the range:

• Short care (under 1 year): ~10% of those needing care. Direct cost: $50K–$130K. Easily absorbed at $5M+.
• Average care (2–3 years): Most common scenario. Direct cost: $150K–$390K. Manageable at $5M+, a notable withdrawal at $2M.
• Extended care (5+ years): ~20% probability. Direct cost: $370K–$650K+. Still absorb-able at $10M+ but begins to affect the estate plan meaningfully, especially for a couple where both spouses may need care sequentially.
• Extreme scenario (10+ years): Uncommon but not rare for cognitive decline. Direct cost: $750K–$1.3M+. Changes the calculus even at $15M.

For a married couple, the compounding risk is that both spouses may eventually need care — and if one has a 10-year dementia-related care need, the assets available to support the surviving spouse can be substantially depleted.

The self-insure analysis for $5M–$50M

Self-insuring means using portfolio assets to pay for care when needed, rather than paying insurance premiums. For HNW households, this is often the right answer — but the analysis needs to be explicit, not assumed.

The key variables:

• Portfolio size. A $15M portfolio losing $400K to a 3-year care event is 2.7% depletion — immaterial to the estate plan. A $5M portfolio losing the same amount is 8% depletion — manageable but not trivial, especially for a couple.
• Concentration risk. If your $10M is 60% in one illiquid stock or a business interest, "self-insuring" requires liquidating that concentrated position under potential time pressure — exactly when you least want to be forced sellers.
• Surviving spouse needs. If one spouse needs 7 years of nursing home care at $130K/yr ($910K total), the surviving spouse may have significantly less capital for their own retirement and potential future care needs.
• Estate goals. If passing a specific amount to children or a foundation matters, LTC costs reduce the estate directly. Some households buy coverage not to protect their retirement but to protect the bequest.

Self-insure impact calculator

Estimate the portfolio impact of a long-term care event against your specific asset base, and compare it to the cost of a typical insurance premium over the same period.

Growth assumption: 5% annual portfolio return. Opportunity cost calculated over 20 years. Premium FV uses the same rate. For a couple, double the direct care cost if both spouses require care sequentially.

Why even $10M+ households sometimes choose coverage

Self-insuring is financially viable at $10M+ for average care scenarios. So why do some advisors still recommend coverage for wealthy clients? Four legitimate reasons:

• Protecting the surviving spouse. A 7-year nursing home stay for one spouse can consume $900K+ in assets. That depletes the surviving spouse's financial base — particularly relevant when one spouse is significantly younger and has decades of retirement ahead. Coverage creates a firewall between the care event and the survivor's security.
• Protecting the estate/bequest. If a specific inheritance matters — funding a family foundation, passing a specific amount to children — coverage "ring-fences" that goal from care costs. This is particularly common for clients with illiquid estate assets (real estate, business interests) who don't want a care event to force a sale.
• Handling concentration and illiquidity. If 40%+ of net worth is in one stock, a family business, or real estate, the liquid portion available to self-insure is smaller than the headline net worth suggests. A $10M household with $6M in a closely held business has $4M liquid — a different self-insurance picture.
• Cognitive decline and delegated management. Extended dementia care often coincides with reduced capacity to manage finances. Coverage simplifies the burden on family members or successor trustees who are managing assets under a POA or trust — they don't also have to be running care cost logistics.

Product landscape for HNW households

Traditional LTCI

Standalone long-term care insurance pays a daily or monthly benefit when you meet the benefit triggers (typically: inability to perform 2 of 6 ADLs, or cognitive impairment). Key characteristics:

• Premium flexibility: Lowest annual premium for a given benefit amount, but premiums are not guaranteed level — carriers have historically increased premiums on in-force policies, sometimes 50–100% over time.
• Use-it-or-lose-it: If you never need care, premiums paid are gone. No return of premium unless you purchase that rider (expensive).
• Inflation protection: Critical to include 3–5% compound inflation protection. Without it, a $200/day benefit purchased today may cover only a fraction of future daily costs. This rider adds significantly to premium cost.
• Fewer carriers: The standalone LTCI market has contracted substantially since 2010. Mass Mutual, Mutual of Omaha, and a few others remain active, but shopping is more limited than a decade ago.

Hybrid life/LTC (linked-benefit)

The most popular product structure for HNW households. You fund a permanent life insurance policy — often with a single premium or limited-pay structure — and the policy includes an accelerated benefit rider that allows the death benefit to be accessed tax-free for qualifying LTC expenses. Features:

• Return of premium: If you never need care, the death benefit passes to heirs estate-tax-free (inside an ILIT if large enough). You're not buying "insurance you lose if you're healthy."
• Stable pricing: Premium is fixed. No rate increase risk. Common structures: Lincoln MoneyGuard, OneAmerica Asset Care, Pacific Life PremierCare, Securian SecureCare.
• Tax treatment: Death benefit paid income-tax-free to heirs (IRC § 101(a)). LTC benefits paid income-tax-free as long as the policy is tax-qualified (IRC § 7702B).³
• Single-premium funding: Common to fund with a $200K–$500K lump sum, generating $400K–$1M+ of LTC coverage. An efficient use of idle fixed-income or CD assets.

Hybrid annuity/LTC

A deferred annuity with an LTC benefit multiplier (typically 2× or 3× the annuity value). Funded with a lump sum. Provides tax-deferred growth, income option, and expanded LTC access. Less common than life/LTC hybrids but can be useful if the primary goal is income rather than estate transfer. Annuity gains are ordinary income when distributed; LTC benefits are tax-free when properly structured.

Private Placement Life Insurance (PPLI) with LTC rider

For households above $15M–$20M, PPLI structures (institutional variable universal life insurance) allow larger premium amounts, access to institutional investment strategies inside the policy, and maximum tax efficiency. Some PPLI structures include LTC riders. This is a specialized product requiring an insurance specialist with institutional carrier relationships — not the typical product discussed at a wirehouse or insurance agency. The cost structure and minimum commitment ($1M+) makes it appropriate only at higher asset levels.

Tax treatment of LTCI premiums — limited at HNW

Qualified LTCI premiums are treated as medical expenses under IRC § 213(d)(10).⁴ But for most HNW households, the itemized deduction is practically unavailable: medical expenses are only deductible to the extent they exceed 7.5% of AGI. At $400K+ AGI, that threshold is $30,000+, which typically exceeds the LTCI premium alone.

Age-based deduction caps for 2026 (IRS Rev. Proc. 2025-32, § 4.27):⁵

Exceptions that make premiums more tax-efficient for some HNW clients:

• HSA funds: Qualified LTCI premiums are eligible medical expenses for HSA reimbursement, subject to the same age-based caps.⁴ Using HSA funds converts a non-deductible expense into a tax-free withdrawal — valuable if you have accumulated a large HSA balance. At age 65+, HSA withdrawals for qualified medical expenses including LTCI premiums (up to the age cap) are fully tax-free.
• C-corporation owners: A C-corp can deduct qualified LTCI premiums as a business expense when provided to employees — including owners who are also W-2 employees — with no age-based dollar cap (as long as the policy is non-discriminatory or covering all employees similarly).
• Self-employed (Schedule C/S-corp): Self-employed individuals can deduct LTCI premiums as self-employed health insurance under IRC § 162(l), subject to the age-based caps, taken above-the-line. This partially overcomes the 7.5% AGI problem since it's not on Schedule A.

How a fee-only wealth advisor integrates LTC into the overall plan

LTC planning decisions don't live in isolation. The right answer depends on coordination across several planning dimensions:

• Liquidity analysis. Separate the "headline net worth" from the liquid self-insurance pool. What portion of your assets can realistically fund care on short notice, without forced sale of illiquid positions?
• Concentration review. If the self-insurance pool is heavily concentrated in one position, the self-insure decision looks different. An advisor quantifies the risk of a forced liquidation in a down market coinciding with care needs.
• Estate interaction. If you've implemented an irrevocable trust to remove assets from the estate, those assets may not be available to self-insure. Your advisor should model the LTC risk on a post-trust-transfer basis.
• Sequential care risk for couples. Run the analysis for a worst-case scenario where both spouses need extended care, sequentially or concurrently, and the survivor needs to fund 20+ years of retirement from reduced assets.
• Hybrid product sourcing. HNW hybrid life/LTC products are often best sourced through an independent fee-only advisor or a fee-based insurance specialist — not a wirehouse financial advisor who may be limited to proprietary or commission-heavy products.

1. CareScout (Genworth) 2025 Cost of Care Survey — National median care costs. Data collected July–November 2025. Nursing home private room $355/day; assisted living $6,200/month; home health aide $35/hr.
2. Northwestern Mutual: Average LTC Need Duration — Average nursing home stay ~3 years (women 3.7, men 2.2); 70% of 65+ will need some LTC; 20% need 5+ years. Cross-referenced with ASPE HHS lifetime LTC risk study.
3. IRC § 7702B — Treatment of Qualified Long-Term Care Insurance (Cornell LII). Defines tax-qualified LTCI; LTC benefits paid income-tax-free when policy meets requirements. Hybrid life/LTC benefits receive same income-tax-free treatment when triggered by qualifying LTC events.
4. IRS Publication 502 — Medical and Dental Expenses. Qualified LTCI premiums are medical expenses, eligible for HSA reimbursement, subject to age-based limits under § 213(d)(10).
5. AALTCI: 2026 Long-Term Care Insurance Deductible Limits — 3% increase from 2025 limits per IRS Rev. Proc. 2025-32, § 4.27. Age 71+: $6,200; age 61–70: $4,960; age 51–60: $1,860; age 41–50: $930; age 40 or under: $500.

Care costs reflect 2025 CareScout national median survey data. Tax limits reflect 2026 IRS guidance (Rev. Proc. 2025-32). High-cost state costs may run 30–60% above national medians. Consult a licensed insurance specialist and fee-only wealth advisor for advice specific to your situation, state, and health status.