The “Great Wealth Transfer” is often described as though trillions of dollars will simply pass from aging baby boomers to their children and grandchildren. But that description ignores an enormous financial threat standing between today’s older generation and tomorrow’s inheritance: the cost of long-term care.
Recent reporting by the San Francisco Chronicle and MarketWatch emphasizes that much of the wealth supposedly waiting to be transferred is not sitting safely in protected inheritance accounts. It consists of retirement savings and home equity that the owners may need during their lifetimes.
Years of home care, assisted living, or nursing-facility care can consume those assets before the intended beneficiaries ever receive them. The Great Wealth Transfer is real, but for many families, the amount ultimately transferred will depend less on investment performance than on whether the older generation needs long-term care and whether the family planned for that possibility early enough.
Retirement Health-Care Costs Are Already Enormous — Before Long-Term Care Is Added
A new 2026 estimate reported by MarketWatch places the average lifetime retirement health-care cost for a person retiring at age 65 at approximately $185,500.
That is a 7.5 percent increase from the comparable 2025 estimate. It assumes enrollment in Original Medicare Parts A and B and a Medicare Part D prescription-drug plan. It includes Medicare premiums, prescription costs, deductibles, co-payments, and other medical expenses.
It does not include long-term care.
That exclusion is critical. A retiree may need $185,500 for ordinary health-care expenses and then face hundreds of thousands of dollars in additional home-care, assisted-living, or nursing-home expenses.
The 2026 Milliman Retiree Health Cost Index illustrates how widely estimates can vary depending on assumptions about longevity, supplemental coverage, investment returns, and the type of Medicare coverage selected. Milliman estimates that a healthy 65-year-old couple retiring in 2026 would need approximately $418,000 in savings to fund projected health-care expenses under Original Medicare with Medigap Plan G and Part D. The couple’s projected lifetime expenditures would total approximately $637,000.
Those Milliman figures also exclude the potentially devastating cost of extended long-term care.
Medicare Does Not Pay for Long-Term Custodial Care
Many retirees mistakenly believe Medicare will pay for their care if they become chronically ill, physically disabled, or cognitively impaired.
Medicare’s own website states the rule directly: “Medicare doesn’t pay for long-term care.”
Medicare distinguishes long-term custodial care from short-term skilled care. Medicare may cover qualifying skilled nursing, therapy, and rehabilitation services for a limited period when all coverage requirements are satisfied. It does not pay one penny for ongoing assistance with the ordinary activities of daily living when custodial care is the only care required.
The uncovered services can include assistance with:
- Bathing
- Dressing
- Eating
- Toileting
- Transferring between a bed and chair
- Continence
- Medication reminders
- Meal preparation
- Supervision necessitated by dementia
Medicare also does not pay for 24-hour care at home or personal-care assistance or assisted living when that is the only care the individual needs. Medigap insurance supplements Medicare-covered services; it does not convert uncovered custodial care into a Medicare-covered benefit. See Medicare’s long-term-care coverage explanation.
The Probability of Needing Care Is Too High to Ignore
No one knows whether a particular person will need long-term care, how intensive the care will become, or how long it will last. But ignoring the risk is not rational planning.
The federal Administration for Community Living reports that someone turning 65 has almost a 70 percent chance of needing some type of long-term services and supports during the remainder of the person’s life.
The agency reports the following averages:
- Women need care for approximately 3.7 years.
- Men need care for approximately 2.2 years.
- About 20 percent of people turning 65 will need care for more than five years.
- Approximately 65 percent will use some form of care at home.
- Approximately 37 percent will use care in a facility.
These figures include paid and unpaid care. Unpaid family care may reduce the amount paid to professional caregivers, but it is not free. It can require adult children to reduce their working hours, leave the workforce, interrupt retirement contributions, travel repeatedly, or provide physically and emotionally demanding care for years. See the Administration for Community Living’s long-term-care statistics.
What Long-Term Care Costs Today
CareScout’s 2025 national survey reports the following median costs:
- Nonmedical home caregiver: $35 per hour
- Home care at 44 hours per week: $80,080 per year
- Assisted-living community: $6,200 per month, or $74,400 per year
- Semi-private nursing-home room: $114,975 per year
- Private nursing-home room: $129,575 per year
These are national medians. Costs in Northern Virginia, suburban Maryland, Washington, DC, and other expensive metropolitan areas can be substantially higher. A person requiring round-the-clock home care can incur expenses far beyond the survey’s 44-hour-per-week assumption. See CareScout’s Cost of Care data.
At the national median rate, three years in a private nursing-home room would cost approximately $388,725 at current prices. Five years would cost approximately $647,875.
That calculation assumes no future inflation and no additional medical, dental, prescription-drug, housing, tax, or personal expenses.
Home Equity Is Not the Same as Protected Wealth
For many families, the house is the largest asset. Decades of mortgage payments and appreciation may have produced hundreds of thousands of dollars — or more — in equity.
But home equity can be consumed by long-term care in several ways.
A homeowner may sell the house to pay for assisted living or nursing-home care. A spouse or adult child may use savings to maintain the house while the owner is receiving care elsewhere. The family may obtain a reverse mortgage or home-equity loan to finance caregivers. After the owner dies, the house may be subject to Medicaid estate recovery, depending on the state, the services received, the form of ownership, the estate assets, and the exemptions that apply.
The San Francisco Chronicle’s Great Wealth Transfer reporting focuses heavily on this problem. In many households, the anticipated inheritance is not a diversified investment portfolio. It is a residence and retirement accounts accumulated over a lifetime. Both may be spent when chronic illness creates a prolonged need for care.
A house that appears on a personal financial statement as a million-dollar asset is not necessarily a million-dollar inheritance.
Retirement Accounts Can Disappear Faster Than Expected
Retirement accounts create a separate problem. Withdrawals from traditional IRAs and retirement plans are usually taxable income. A family that needs $150,000 to pay a year of care may have to withdraw substantially more than $150,000 to cover the resulting federal and state income taxes.
Large distributions can also increase modified adjusted gross income, trigger higher Medicare Part B and Part D premiums through the income-related monthly adjustment amount, increase the taxable portion of Social Security benefits, and push the account owner into a higher marginal income-tax bracket.
The result can be a destructive cycle:
- The family withdraws money to pay for care.
- The withdrawal creates taxable income.
- Additional money must be withdrawn to pay the resulting taxes.
- Increased income may produce higher Medicare premiums.
- Investment assets are liquidated faster, reducing future growth and income.
A retirement account worth $750,000 does not necessarily provide $750,000 of spendable long-term-care funding. It also does not necessarily provide a $750,000 inheritance.
A Conventional Estate Plan Does Not Solve This Problem
A revocable living trust can avoid probate, provide continuity during incapacity, and establish orderly instructions for distributing property after death. It does not shield the creator’s assets from the creator’s long-term-care expenses.
The same is true of a Will, financial power of attorney, medical directive, and beneficiary designation. These documents are essential, but they do not create a funding source for long-term care or make otherwise countable assets unavailable for Medicaid eligibility.
A complete plan must address two separate questions:
- Who will manage and receive the assets?
- What will happen to those assets if the owner needs years of expensive care?
Traditional Estate Planning concentrates on the first question. Elder Law and long-term-care planning must address both.
Families Need a Long-Term-Care Funding Strategy
There is no single solution appropriate for every person. A complete analysis should consider the individual’s age, health, income, assets, family structure, housing plans, insurance eligibility, caregiving resources, tax position, and goals.
Potential components include:
- Traditional long-term-care insurance
- Life insurance or annuity products with long-term-care benefits
- A dedicated pool of investments for care expenses
- Health savings account funds
- Home equity
- Family caregiving arrangements
- Veterans benefits for qualifying veterans and surviving spouses
- Medicaid Planning
- A properly designed Medicaid asset protection trust
Insurance must be evaluated while the proposed insured is still healthy enough to qualify. Waiting until a diagnosis or functional decline occurs can make coverage unavailable or prohibitively expensive.
For those who cannot qualify for conventional coverage, other planning options may remain available. I discuss this problem in “What if I Can’t Qualify for Long-Term Care Insurance?”
Medicaid Planning Is Not Limited to Impoverished Families
Medicaid is the principal public program that pays for long-term custodial care for financially eligible individuals. Eligibility is governed by detailed federal and state rules concerning income, resources, transfers, trusts, spouses, homes, retirement accounts, and other property.
The purpose of lawful Medicaid Planning is not to conceal assets or provide false information. It is to arrange a person’s affairs under the rules established by Congress and the states so that the individual can obtain needed care without unnecessarily consuming everything accumulated over a lifetime.
Some planning strategies must be completed years before care is required. Other crisis-planning strategies may still be available after someone enters a nursing home or is about to enter one. The available options differ significantly among Virginia, Maryland, and the District of Columbia.
A properly drafted and administered Medicaid asset protection trust can protect selected assets after the applicable transfer-penalty period has expired. The trust must be designed specifically for Medicaid law. A standard revocable trust does not provide that protection.
Our Living Trust Plus® Medicaid Asset Protection Trust is designed for clients who want to protect assets from the catastrophic expenses associated with long-term care while retaining important estate-planning and tax advantages.
You can read more about our broader approach to Medicaid Asset Protection and Life Care Planning.
Planning Must Begin Before the Family Is in Crisis
The worst time to learn about long-term-care financing is after a fall, stroke, dementia diagnosis, hospitalization, or sudden discharge recommendation.
A crisis compresses decisions that should have been made over several years or several days. Families are forced to compare facilities, hire caregivers, complete financial applications, locate legal documents, determine who has authority, and decide how to pay bills while dealing with a medical emergency.
Earlier planning provides more options.
It allows time to:
- Determine whether long-term-care insurance is available and affordable.
- Structure assets before a five-year Medicaid transfer look-back becomes critical.
- Coordinate retirement accounts with the overall care plan.
- Decide whether the house should be retained, transferred, sold, or placed in a properly designed trust.
- Establish effective financial and medical powers of attorney.
- Identify appropriate decision-makers.
- Discuss caregiving expectations with children and other family members.
- Analyze the rights and financial security of a spouse who remains at home.
- Prepare for possible incapacity before the person loses legal capacity to act.
Do Not Confuse an Expected Inheritance with an Assured Inheritance
Adult children often build expectations around the family home, their parents’ retirement accounts, or an anticipated share of an estate.
Those expectations may be understandable, but they are not a plan.
An inheritance is what remains after the parent’s lifetime expenses, taxes, debts, and care costs have been paid. When a parent requires several years of care, the remainder may be far smaller than anyone expected.
Families should discuss this openly. Parents need to decide whether preserving assets for a spouse, children, grandchildren, or a disabled beneficiary is an important objective. Children need to understand that providing care can create financial and personal consequences for them even when they never receive the anticipated inheritance.
The Great Wealth Transfer will not occur automatically. For many families, it will be reduced or eliminated by long-term care.
The Real Planning Question
The central question is not simply, “How much will I leave when I die?”
The more important question is:
What will happen to my family, my home, and my life savings if I live for years while needing assistance with the basic activities of daily living?
A retiree may need approximately $185,500 for ordinary health-care expenses even before long-term care begins. One year of private nursing-home care now carries a national median cost approaching $130,000. Several years of care can consume the home equity and retirement savings that were supposed to fund the next generation’s inheritance.
The answer is not to assume that Medicare will pay, that family members will provide unlimited free care, or that a standard revocable living trust will protect the assets.
The answer is to plan while health, time, and legal options remain available.
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