What women need to know about long-term care in estate planning

You may have the dream of growing old with your spouse peacefully at home, but what if one of you requires long-term caregiving in a facility that starts to drain your assets as a couple?

This can be of particular concern to couples who have a substantial age difference between them and heterosexual couples as statistically, husbands pass away six years earlier and are more likely to get sick and require caregiving before their wives. Because women have a higher probability of living longer, they especially need a plan to safeguard their financial future to ensure there's enough for retirement and long-term care funds after their husband is gone, said Chrisanna Elser, financial planning quality assurance specialist at BOK Financial®.

Although no one likes to think of these negative “what-if” scenarios, you need a plan to safeguard your financial future to ensure there's enough for retirement and long-term care funds after your spouse is gone.

"It's not a pleasant topic to plan for, but women have a tendency to take care of everyone around them and then neglect themselves. It's something I encourage my clients to consider in their estate planning,” said Elser.

“We have to consider: what if you're the only one left to take care of you?”

- Chrisanna Elser, financial planning quality assurance specialist at BOK Financial

When couples marry, one person often takes the lead on the family finances, which can also leave the other person uninformed about their combined financial situation.

"We've seen a lot of women who were married and then the husband predeceases them, loses capacity, or they get divorced, and all of a sudden she's having to drink from the firehose to learn all the financials from scratch," said Jessica Hendrix, senior trust officer at Bank of Oklahoma Private Wealth.

How medical and long-term care costs could deplete assets
If your spouse does require long-term care, such as assisted living or a nursing home, the expense can add up quickly. According to GenWorth's 2024 survey, the costs of caregiving can start at a national average of $77,792 annually for home care to $127,750 annually for a private room in a nursing home, which can deplete assets quickly if not planned for. Medicare, a federal health insurance program for people 65 and older, can help cover medical bills, but does not cover long-term care costs.

If the spouse requiring long-term care is also in charge of the family finances, the other spouse may not be aware of how much the family budget is impacted by these costs. Depending on the couple's income level and assets, it could leave little for the surviving spouse when they need long-term care later in life.

Long-term care plans in estate planning
Many couples may create a will or a trust for their estate plan, but they may not think about long-term care planning. While estate planning focuses on where assets go when a person passes away, long-term care planning addresses the potential need for medical care if an individual has extended health and/or aging challenges during their lifetime.

Couples need to start planning for long-term care as soon as possible to maximize time and options, Hendrix stressed.

"Start saving and learning about investments as early as you can so compound interest works for you," urged Hendrix. "I also recommend keeping an inventory of assets to know where everything is."

It's important for both members of the couple to be involved in the family finances, Elser added. Working with a financial planner can help couples get organized and receive strategic advice to maximize earnings and plan for the future. "Nobody has ever said to me, 'You made me save too much money!'" said Elser.

Explore asset-protection strategies for long-term care
To cover the costs of a spouse needing care and to help ensure assets don't get spent down to the point the other spouse won't have enough, Elser and Hendrix suggested two insurance policies to consider:

• Long-term care insurance will help cover caregiving and long-term care such as assisted living, nursing homes and memory care costs not covered by Medicare.
• Life insurance upon death of the insured can provide financial support for the surviving spouse. Some hybrid life insurance policies combine permanent life insurance and long-term care coverage.

Purchasing these policies early in life typically means lower premiums.

When is it time for Medicaid?
If a couple waits too long to put insurance policies in place, premiums go up as the couple ages and could become cost prohibitive. If you do not have the assets to self-pay for long-term care, you can apply for Medicaid, a joint federal and state program that covers medical and long-term care costs for people with limited resources.

However, for an individual to qualify for Medicaid long-term care in most states, the maximum amount of countable assets they can have is $2,000. For married couples applying together, it's $3,000.

It's important to note that when a Medicaid applicant is married, the assets of both spouses are considered jointly owned and, if over the limit, must be spent down to meet Medicaid requirements. Even if kept in separate accounts, in the eyes of the law and the government, it's one "pot."

Medicaid does grant some asset protections for the healthy spouse (aka the “community spouse”), such as Spousal Refusal, a Community Spouse Resource Allowance and a Minimum Monthly Maintenance Needs Allowance. However, it's worth noting that the government determines allowances, and they may not be at the level the couple's lifestyle is accustomed to.

Instead, Elser suggests more proactive and strategic moves that could be deployed if needed.

Establish an irrevocable trust
Couples can protect a portion of assets from being depleted by medical expenses or Medicaid spend-down requirements to be used later by the community spouse for their care.

"But there are some roadblocks with creating an irrevocable trust," said Elser. "They are expensive, you can't change it once it's set, and there is a five-year look-back, meaning couples would need to create and fund the trust five years before applying for Medicaid."

When divorce is a last resort
When couples have run out of options, the last resort to protect one spouse's assets from being spent on the other's care is to divorce.

"While it sounds harsh, getting a divorce for this reason doesn’t have to be seen as a negative. You're doing it so the healthy spouse will have the resources to cover their life and care when they eventually may need it,” Elser said.

To prepare for this potential option, couples need to set themselves up correctly. This includes:

• Keeping bank accounts separate. This can help preserve individual assets by clearly dividing who owns what.
• Getting a prenuptial or postnuptial agreement. This document should clearly set expectations for a separation of assets.

Both Hendrix and Elser suggest working with an estate lawyer or elder law attorney and a financial planner to determine the best strategies to plan for long-term care. "Put it in writing in the estate plan—and make sure everyone who needs to know about it can find it," said Hendrix.