Family Wealth Is Evaporating As the Cost of Aging Soars: Proactive Planning Options

Economists have long described the coming transfer of wealth from baby boomers to younger generations as the greatest in history. Estimates have ranged from $68 trillion to $84 trillion expected to change hands over the next two decades. A closer look at the data, however, tells a sobering story. A July 2026 Washington Post analysis of Health and Retirement Study data found that the costs of aging are quietly eroding, and in a growing share of cases, obliterating, the very wealth families hoped to pass on.  Worse, adult children, rather than being the beneficiaries of generational wealth, are in some cases spending down their own savings to pay for their parents’ care. 

washingtonpost.com

A Large and Growing Problem

The Health and Retirement Study is a federally funded survey following thousands of Americans from their early 50s until death, recording their finances every two years.  The Washington Post examination focused on the spending of seniors in the final decade of life, and revealed that:

• The median out-of-pocket care spending per person was $19,179.
• One in six spent more than $50,000.
• One in twenty spent more than $100,000.
• The share of people left with essentially nothing after care costs rose from 6% (those who died 2006–2010) to nearly 11% (those who died 2017–2022).
• Among the poorest fifth of Americans, 41% were left with nothing, having spent nearly one-third of their wealth on care.
  finance-commerce.com

These figures understate the full burden because they often exclude room-and-board costs in assisted living or nursing facilities. Median assisted-living costs reached roughly $74,400 per year in 2025, while a private nursing-home room averaged about $129,575 annually. Multi-year care for dementia at that cost can approach or exceed $1 million. 

Medicare generally does not cover custodial long-term care. Only about 3% of adults overall, and roughly 15% of those 65 and older, carry long-term care insurance. The result is that families, particularly middle- and lower-wealth households, absorb the cost.

The popular narrative of a massive, relatively automatic wealth transfer therefore requires significant qualification. For many families, the cost of aging is not merely reducing inheritances; it is eliminating them.

Planning Responses: A Structured Approach

The good news is that families are not without planning tools. Effective responses generally fall into several complementary categories. The order below reflects a practical sequence many elder law and aging-in-place professionals recommend:

    •Aging-in-Place Planning- Keeping Care at Home Whenever Possible:  The single most powerful way to reduce the financial and human cost of aging is to prevent unnecessary and avoidable institutional care.  To reduce the cost of extended hospitalization, Medicare encourages skilled nursing or institutional rehabilitation care on a limited, temporary basis after a qualifying hospital stay. This care is intended to make it possible for a patient to return home.  In practice, these short-term stays frequently become long-term placements. This is the case for those patients who have nowhere suitable to go after their Medicare days are exhausted.  Planning ahead, though, and making a  home a suitable alternative can avoid prolonged or permanent institutional care for these patients.  

But the more tragic story is for those who select institutional care for temporary rehabilitation and find that the choice of institutional care transformed a temporary need for rehab into a permanent need for on-going care. Whether that permanent need results from the high incidence of medical mistakes that occur in nursing homes, acts of other patients, security risks, transport risks, or merely the higher risk of infectious diseases which exists even in nursing homes that maintain a high quality of care, the harsh reality is that institutional care has risks that simply do not exist at home.  These risks can cause permanent, physical, psychological, or emotional injury or impairment.  Simply, once a person is in a nursing facility, returning home becomes significantly more difficult. For more, see the articles listed at the bottom of this post, if you dare. 

Deliberate aging-in-place planning focuses on:  

• Advanced Estate Planning Tools: A trust, durable powers of attorney, and advanced directives specifically planning for and directing: (1) aging in place; (2) competency and physical capability determination and management; (3) family caregiving and caregiving agreements; and (4) guardianship protection, each separately protecting the right and ability to stay home, the trusted decision-makers, the maker's advanced decision-making, and the necessary assets.

• Strategic Home Modifications:  Whether a senior is living in their own home alone, with a spouse or child, or moving to live with another, that home must be made and kept suitable as needs change, including, but not limited to: (1) home modifications that improve safety and accessibility; (2) early arrangement of home-care services and supports; and (3) technology that enables remote monitoring and daily check-ins; and (4) deployment of technology to meet evolving needs and challenges.  

• Importance of Home Care: Keeping care at home whenever possible does more than support independence. It preserves familiar routines, reduces the risk of the disorientation and decline that often accompany institutional placement, and gives families greater control over the quality and continuity of care. For many older adults, remaining in a known environment is itself a form of protection, one that no facility can fully replicate.  For more, see the following: "The High Value of Home Health Care: A Wake-Up Call for Aging in Place Planning;"  "Building Your Chosen Family: Creating Support Networks for Seniors Aging in Place," "Home Sweet Home. Home as Medicine for Dementia and Memory Loss-: Why and How it Works," "Coordinating Family Care: The Key to Sustainable Aging in Place," and "The Heart of Home Care: Why Family Is the Ultimate Key to Successful Aging in Place."

• Traditional Financial Planning Tools:  Keeping someone safely at home is almost always less expensive than institutional care and preserves dignity, autonomy, and family wealth far more effectively.  Even with strong aging-in-place efforts, though, some paid care is often required. It is important to remember that care expenses are monthly recurring expenses.  Predictable, guaranteed sufficient income may provide better protection than simply a seemingly large sum of cash or investments.  Discuss both strategies with your advisor.  Traditional financial planning tools can help create both liquidity and income streams. Common options include: (1) Long-term Care Insurance; (2) Home Health Care Insurance; (3) Catastrophic Health and/or Disability Insurance; (4) Annuities (including bonus or income annuities designed to generate predictable, guaranteed cash flow); (4) Indexed universal life or other permanent life insurance structures that can provide living benefits or cash-value access; (5) Professionally managed brokerage accounts designed for systematic withdrawals; and (6) Reverse or traditional mortgages (particularly for homeowners who wish to age in place and unlock home equity without a monthly repayment obligation, reverse mortgages may be an acceptable last resort).  

• Reducing the Financial Risk of Long Term Care: Traditional long-term care insurance can shift a substantial portion of the risk of high care costs. Hybrid products (life insurance or annuities with long-term care riders) have become more popular because they address the common concern of “use it or lose it.” Coverage is most affordable and attainable when purchased before significant health issues arise. Families should review existing policies carefully for benefit triggers, inflation protection, elimination periods, and the financial strength of the carrier.

• Medicaid Planning, Including Medicaid Asset Protection Trusts (MAPTs): For many low- or middle-income families, Medicaid remains the only realistic way to cover extended long-term care without complete spend-down. Properly structured MAPTs, when funded outside the applicable look-back period, can protect assets while still allowing eligibility for benefits. Other Medicaid planning techniques, careful use of spousal protections, exempt resources, qualifying caregiver exemptions for asset transfers, caregiver agreements, and spending strategies, also play important roles. This area is highly technical and state-specific; do-it-yourself approaches frequently fail.  These are best left to elder law attorneys. 

These and other tools involve trade-offs among and between liquidity, risk, fees, tax treatment, and longevity protection. Any financial product or legal decision should be made with a qualified professional who can evaluate the full picture of risk and reward in light of the individual’s age, health, other assets, and goals. 

A Coordinated Strategy Works Best

No single tool solves the problem . The most resilient plans typically include:

• Aggressive efforts to support aging in place;
• Thoughtful use of financial products for liquidity and income;
• Appropriate long-term care insurance where available and suitable;
• Timely Medicaid planning for those who may eventually need means-tested benefits; and
• A collaborative approach among and between professionals.

Early conversations and early action matter. Once a care crisis arrives, options narrow dramatically and costs escalate.

A Final Word

The Washington Post analysis provides a valuable public service by documenting how the costs of aging are quietly consuming family wealth. The projected multi-trillion-dollar wealth transfer will still occur for many higher-wealth households. For a large share of middle- and lower-wealth families, however, the transfer is being substantially reduced or eliminated by care expenses.

Proactive planning cannot remove every risk, but it can meaningfully change the trajectory. Families who treat the cost of aging as a predictable planning issue rather than an unpredictable crisis are far more likely to preserve both independence and a portion of the legacy they hoped to leave.

More Stories/Posts Detailing Institutional Care Risk

• One-Third of Nursing Home Residents Injured or Killed In Treatment
• The Myth of Rehab for Hospitalized Seniors: Forty Percent Never Return Home
• Are You Really Better Off in a Nursing Home than at Home? SNF Residents with Pre-existing Healthcare Associated Infections Less Likely to be Readmitted to Hospital
• New Controversial Sign-Off Rule Increases Burdens On Skilled Nursing Facilities- Threatens Transfer To Hospitals
• Institutional Care: America's Most Vulnerable Seniors Raped and Sexually Abused;
• COPD Patients Discharged to a Skilled Nursing Have Two Times the Risk of Death Within Year Compared to Those Who Go Home
• Hepatitis Infection Risk in Nursing Homes Up 50%; Infection Risk Across the Board Increases
• Resident's Death Caused By Nursing Home Failing to Follow Advanced Directives Requesting CPR
• Nursing Home Involvement in Patient's Death Object Lesson on Aging-in-Place Planning
• Nursing Home Worker Faces Homicide Charges in Violent Death of Resident;
• Paramedics Often Obstructed, Provided Insufficient Information On Nursing Home Calls
• Habits Are Hard to Break: Nursing Homes Habitually Violate Federal Standards Year After Year
• CDC Reports That SNF Workers Most Likely Among Health Care Workers to Forego Recommended Vaccinations
• Ohio Ranks Poorly on Long-Term Care Services Scorecard
• Hospice Costs Medicare Less Notwithstanding that Hospice Patients Live Longer

This article as inspired by: Federica Cocco and Shannon Najmabadi, “As the cost of aging soars, families’ wealth is evaporating,” The Washington Post, July 22/23, 2026.

New Federal Cap on Home Equity for Medicaid Long-Term Care: What It Means for Planning

A significant change to Medicaid rules is coming in 2028 that will affect many homeowners, especially those in higher-cost housing markets. On July 4, 2025, the Budget Reconciliation Act of 2025 (often called the “One Big Beautiful Bill”) was signed into law. One of its provisions creates a new nationwide cap on home equity for people seeking Medicaid coverage for long-term services and supports (LTSS), including both nursing home care and home- and community-based services (HCBS).

What Changed?
Previously, federal law set a minimum home equity limit (approximately $752,000 in 2026) that states could raise up to a higher amount (approximately $1,130,000 in 2026). Both figures were adjusted annually for inflation. Twelve states plus the District of Columbia had chosen the higher limit.
Starting January 1, 2028, the rules change dramatically:

• There is now a hard national ceiling of $1,000,000 on home equity.
• This cap is frozen; it will not increase with inflation in future years.
• States can no longer set a higher limit for non-agricultural homes.
• The change applies to both institutional care and HCBS waivers.

Illustration of the Change

Home Equity Amount	Current Rule (through 2027)	New Rule (effective Jan. 1, 2028)	Likely Outcome for Medicaid LTSS
$800,000	Exempt in all states	Exempt	Qualifies
$1,050,000	Exempt in high-limit states (NY, CA, etc.)	Ineligible	Disqualified
$1,200,000	Ineligible in most states	Ineligible	Disqualified
Agricultural-zoned home	Follows prior inflation-adjusted rules	Still follows prior inflation-adjusted rules	Better protection.

Important Exceptions
The home remains fully exempt (no equity limit applies) if:

• A spouse, child under 21, or blind/disabled child of any age lives in the home.
• The home is on property zoned for agricultural use (these homes keep the old inflation-adjusted rules).

States must still offer hardship waivers in cases of demonstrated need.  There are also federal provisions that allow transfer of the home to qualified individuals, such as certain child caregivers residing in the home for a period of two years, if the applicant was medically qualified for skilled nursing care for at least the two-year period. Why This Matters for Aging in Place
This change makes it harder for “house-rich, cash-poor” seniors to access Medicaid-funded home care or nursing home care without first reducing (spending down) their home equity. In high-cost areas (California, New York, Massachusetts, Hawaii, Colorado, etc.), even modest homes can push equity over $1 million. Because the cap is frozen, the problem will grow worse every year as home prices rise.
For families committed to aging in place, this development actually strengthens the case for proactive planning. Relying on Medicaid HCBS may become less reliable for homeowners with significant equity. Having private resources protected and/or available becomes even more valuable.Does This Change Impact an Existing or Contemplated  Medicaid Asset Protection Trust (MAPT)?
Short answer: No, it does not suggest you should fund a MAPT with fewer assets.
Here’s why:

• The new home equity cap is a separate rule that applies only to the primary residence when determining whether the home itself is an exempt resource.
• A Medicaid Asset Protection Trust (MAPT) is designed to protect countable assets (cash, investments, CDs, non-primary real estate, etc.) from Medicaid’s strict $2,000 asset limit.
• The home equity cap does not change the general asset test or how MAPTs work for non-home assets.

In other words, the new law does not mean you should put less money into a MAPT. If anything, it makes comprehensive asset protection planning more important. With the home potentially becoming a disqualifying factor for more people, protecting your other assets in a properly drafted MAPT gives you greater flexibility and resources while you pursue Medicaid eligibility on the home (if your equity is under the limit).
Note on putting the home itself into a MAPT: In most states, transferring your primary residence into a MAPT can remove it from the home equity calculation (because it is no longer “owned” by you personally). However, this strategy has important trade-offs, including the 5-year lookback period and state-specific rules. In a few states, placing the home in a MAPT can make it a countable asset. This is a complex decision that requires individualized legal advice.Bottom Line and Planning Recommendations
The new $1 million frozen home equity cap is another reminder that Medicaid is a needs-based program with increasingly strict rules. For families who want real choice about where and how they age, the best strategy remains proactive planning well before care is needed.
If you or a loved one owns a home with equity approaching or exceeding $1 million (or if you live in a state that previously allowed higher limits), now is an excellent time to:

• Review your current home equity and long-term care plans;
• Consider whether strategies to manage home equity make sense before 2028;
• Evaluate or establish a Medicaid Asset Protection Trust for other assets; and,
• Explore hybrid long-term care insurance or other private-pay options that support aging in place

This change does not eliminate the value of planning — it actually highlights why early, thoughtful elder law planning is more important than ever.