Creating a Charitable Legacy Through Long-Term Care Planning

By Richard Tanner, CEO and Founder, Ownership Advisors

The landscape of long-term care planning has evolved significantly over the years, especially post-COVID, as more families realize the challenges of aging and chronic care extend beyond financial considerations. Increasingly, affluent families are recognizing that long-term care planning isn't just about protecting wealth – it's about preserving family harmony, reducing emotional stress, and ensuring stability during what can be a deeply challenging time.

For high-net-worth individuals, long-term care planning can also be part of creating a charitable legacy. By integrating long-term care and charitable planning, families protect assets earmarked for philanthropic goals, making it easier to make significant charitable decisions.

Additionally, a carefully crafted long-term care plan allows future generations to focus on stewarding and advancing the charitable intentions of their loved ones, as they are less likely to be consumed by the emotional and financial burdens of caregiving.

Self-Funding vs. Insuring

While most Americans have been self-funding long-term care expenses from current assets, many are wondering if this is the most efficient use of their assets. Market volatility and escalating costs of care have created fear and anxiety about the financial and emotional impact of a long-term care event. At the same time, traditional insurance policies have come under scrutiny due to unexpected premium increases. The good news is the insurance industry has made significant progress by creating better and more flexible products with stronger guarantees that cover both benefits and premiums for life.    

The following are several advanced planning ideas to consider with your clients:

Life Insurance: Many life insurance policies now have efficient long-term care riders that allow policyholders to split benefits between charity and family long-term care needs. For example, a $1 million permanent life insurance policy with a $500,000 long-term care rider can designate surplus benefits to charity upon death.

Charitable Trusts: High-net-worth individuals often use charitable trusts to combine philanthropy with tax planning goals. A personally owned life insurance policy with a long-term care rider creates an asset that preserves estate assets during a person's lifetime while leaving a leveraged death benefit to complete legacy planning goals.

Donor-Advised Funds: By contributing to a donor-advised fund at a public charity like Akron Community Foundation, individuals can create a multigenerational family philanthropic plan. A personally owned long-term care policy guarantees estate assets earmarked for charity will not be depleted during the donor's lifetime and can be designed with a residual death benefit to endow the fund upon death.

Irrevocable Trust Strategy: A specially designed irrevocable life insurance trust funded with a long-term care policy reduces the taxable estate and provides tax-efficient capital to cover long-term care expenses. This strategy involves risk shifting and leverage that many wealthy families already use and turns an irrevocable trust into a more flexible family wealth planning tool. For example, when a claim is paid, the trustee can choose to keep the proceeds in the trust or move tax-free dollars to the insured. The trust-owned policy can also be designed with a residual death benefit earmarked for charity. Only contracts with an indemnity payment option can be used with this approach.

The growing interest in long-term care planning, particularly among high-net-worth individuals, reflects a broader shift in how people view aging and caregiving. It's no longer just about managing financial risk; it's about ensuring stability, preserving family relationships, and planning for the unexpected.

As awareness continues to grow, the role of long-term care insurance in comprehensive wealth and family planning is also likely to grow. Coordinating charitable giving with long-term care planning creates a lasting legacy that reflects family values and impacts future generations.

Advisors who can effectively integrate long-term care into traditional financial, estate and charitable planning are uniquely positioned to help their clients achieve peace of mind and build stronger, more sustainable relationships.

For more strategic ways your clients can build a legacy through philanthropy, contact Laura Lederer, vice president and chief development officer, at llederer@akroncf.org or 330-436-5611.

Ownership Advisors, Inc. is a member of M Financial Group. Securities offered through LPL Financial, Member FINRA/SIPC.
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