Long-term care needs are one of the most common and financially significant risks in retirement. Nearly half of individuals aged 65 and older will require some form of paid long-term care1. One of the many challenges is that long-term care costs are not evenly distributed. Some retirees will incur minimal expenses. Others may face hundreds of thousands, or even millions, of dollars in cumulative care costs. This uneven distribution creates tail risk: a low-probability but high-impact financial event. Proper planning must account for that possibility.
Many individuals and families default to self-funding long-term care as they have sufficient assets and liquidity to absorb potential costs, and they prefer not to pay premiums for a risk that may never materialize. Yet others may not qualify for coverage due to age and/or health. Regardless of the reason, “we’ll just pay for it” is not a strategy. Thoughtful structuring is what separates reactive decision-making from proactive planning. We recommend reviewing with your wealth consultant how to strategically fund potential long-term care expenses while preserving flexibility, tax efficiency, estate goals, and philanthropic objectives.
How Much Could Care Cost?
While averages do not predict individual outcomes, they provide useful planning benchmarks.
Costs also vary significantly by region, as well as what kind of care is needed. Reviewing a Cost of Care survey, such as this one from Genworth/Care Scout for your city, can help estimate local pricing and inflation trends. Additionally, consider:
These variables meaningfully influence projected costs. Review these with your wealth consultant within the context of your financial plan to model different care scenarios to evaluate sustainability under multiple assumptions.
Which Assets Should Fund Care?
A structured withdrawal strategy is essential to maintain tax efficiency and preserve legacy goals. Without planning, large uncoordinated withdrawals can create avoidable tax consequences and disrupt an estate strategy.
When designing a funding strategy, consider:
Creating a Dedicated Liquidity Reserve
Some families benefit from earmarking a portion of assets specifically for care expenses. This may involve:
This reframes care funding as a risk-management decision rather than an emotional one during a health crisis.
Health Savings Accounts (HSAs)
Health Savings Accounts can be highly efficient long-term care funding vehicles.
HSAs offer:
Funds can be invested and compound over time, creating a tax-advantaged reserve for future medical or care expenses. HSAs are most effective for individuals who:
Taxable Brokerage Accounts
Taxable accounts often provide flexibility and favorable long-term capital gains treatment. In many cases, they may be preferable to large IRA withdrawals that may increase taxable income. When drawing from taxable accounts, cost basis matters. Highly appreciated assets may receive a step-up in cost basis at death. In some cases, it may be advantageous to use higher-basis assets for care expenses and retain low-basis, highly appreciated securities for heirs, or to meet philanthropic objectives. This decision must align with life expectancy projections and estate objectives.
Home Equity as a Planning Tool
For many families, home equity represents a significant portion of net worth.
Options include:
Establishing a Home Equity Line of Credit (HELOC)
Accessing equity while continuing to live in the home can provide tax-free liquidity. In some cases, this may also help manage capital gains exposure upon eventual sale.
In community property states such as Washington and California, surviving spouses typically receive a full step-up in basis at the first spouse’s death, potentially reducing capital gains taxes if the property is later sold.
This strategy must be evaluated carefully to ensure:
Selling or Downsizing
For some, selling the home to move into a care facility or a lower-cost residence may be the most practical option — particularly if substantial equity must be unlocked to fund care.
Conclusion
The objective is not simply to cover the cost of care; it’s to ensure that a health event does not disrupt your financial plan, your estate strategy, or your family harmony. Proactive planning provides flexibility, reduces stress, and protects legacy goals. The earlier this conversation occurs, the more options remain available, and the more intentional the strategy can be. The purpose is not to predict the future perfectly, but rather to build resilience into the financial plan so that, regardless of what unfolds, your broader objectives remain intact.
DISCLOSURE: This material has been prepared or is distributed solely for informational purposes only and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Any opinions, recommendations, and assumptions included in this presentation are based upon current market conditions, reflect our judgment as of the date of this presentation, and are subject to change. Past performance is no guarantee of future results. All investments involve risk including the loss of principal. All material presented is compiled from sources believed to be reliable, but accuracy cannot be guaranteed and Evergreen makes no representation as to its accuracy or completeness. Securities highlighted or discussed in this communication are mentioned for illustrative purposes only and are not a recommendation for these securities. Evergreen actively manages client portfolios and securities discussed in this communication may or may not be held in such portfolios at any given time.
The information provided is general in nature and should not be considered legal or tax advice. Consult an attorney, tax professional, or other advisor regarding your specific legal or tax situation. The items included in this publication are our opinion as of the date of this piece, not all encompassing, and are subject to change without notice. Any tax or legal advice contained in this communication is not intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties.