How Do We Pay for Long-Term Care Without Losing the Farm?

I recently received this question from a farm family.  It’s one of the most common — and important — questions farm families ask when thinking about the future.  Long-term care (LTC) is expensive, unpredictable, and often not covered by programs like Medicare. For farmers who’ve spent a lifetime building an operation and want to pass it on, the rising costs of LTC present a real financial risk to the land, the farm business, and the legacy.  The following is a brief discussion on LTC costs and strategies.

The Growing Risk of Long-Term Care

Once upon a time, estate taxes were the biggest financial threat to the family farm. Today, that’s no longer the case. With higher federal estate tax exemptions, few farms owe estate taxes anymore. The real financial threat now? LTC costs.

LTC includes a wide range of services — from home-based personal care to skilled nursing facility stays — and most of it isn’t covered by Medicare. These services help people with chronic illness, disability, or aging-related conditions. For example, assistance with dressing, bathing, eating, or even just getting around. Care might start at home and eventually move to a facility. Costs vary by setting and service, but they add up quickly.

Here are a few important facts to help understand the implications of LTC on farming operations:

• 69% of people over 65 will need some form of LTC.
• Average LTC lasts 3 about years, with women needing slightly more (3.7 years) than men (2.2 years).
• 20% of people will need care for more than 5 years — these are the “outliers” most likely to face LTC costs that can jeopardize the farm.
• In Ohio, a year in a nursing home will cost around $100,000 or more.

For a farm couple, those numbers can double — and the risk of outliving income and savings increases.

Can the Farm Handle It?

If you’re wondering whether your operation could survive those costs, it depends on a few things:

• Do you have income (from Social Security, retirement accounts, rent, etc.) that could help cover LTC?
• Do you have non-farm assets, like savings or investments, to use before touching the farm?
• Would you be considered an “outlier”, needing care for many years — and would your current planning handle that?

In most cases, a farm family can survive average LTC costs, around $180,000, without needing to sell land and other critical assets. But it’s the outliers — the 5-to-10-year nursing home stays — that pose the greatest risk. That’s where planning becomes essential.

Planning Ahead: Options for Managing LTC Risk

There’s no one-size-fits-all solution. But there are strategies that can help reduce LTC risks and protect the farm. Here's a breakdown of the most common options:

1. Do Nothing

For some, doing nothing is a valid strategy — if you have enough income and assets to cover even the worst-case LTC costs without risking the farm. But that’s rare. Most families should at least consider other options.

2. Gifting Assets

Giving land or assets to heirs (usually children) more than five years before applying for Medicaid can protect those assets from LTC costs. But gifting comes with trade-offs:

• You lose control over the assets.
• The heir receives your original tax basis, which could trigger big capital gains taxes later.
• If you need LTC during the five-year look-back period, the gift can cause Medicaid penalties.

Gifting can be effective — but it needs to be done carefully, and early.

3. Irrevocable Trusts

An irrevocable trust can protect assets while allowing some flexibility. You give up ownership and control, but the trust (managed by a trustee) holds the asset for your beneficiaries. If structured correctly and established early enough, the trust assets are shielded from LTC costs — and sometimes still qualify for a stepped-up tax basis at death.

But be warned: these trusts are complex, expensive to set up, and must be carefully maintained.

4. Wait-and-See Approach

This strategy avoids doing anything upfront but relies on having enough income and savings to cover five years of LTC if needed. If care becomes necessary, assets are transferred and the clock starts. The gamble? If you can’t make it through the five-year penalty period, your assets might still be at risk.

5. Self-Insurance

Some families choose to earmark a piece of the operation (a less productive farm, a savings account, etc.) to pay for care if needed. It gives flexibility and control, but it also requires discipline — and can lead to one spouse living more frugally out of fear the money won’t last.

6. Long-Term Care Insurance

LTC insurance can cover all or part of the costs — and newer “hybrid” policies can include a life insurance component so the money isn’t lost if care isn’t needed. But these policies can be expensive and hard to qualify for, especially if you already have health issues. Still, they’re worth exploring with a good advisor.

So, What’s the Best Strategy?

The truth is, there’s no “best” option — just the best fit for your family’s goals, resources, health, and timing. Some families will mix and match strategies. Others will lean heavily on one. The important part is that you understand your risk and make intentional decisions, not default to inaction.

Talk to an Attorney and Plan Ahead

LTC is complicated. Medicaid rules, tax law, trusts, and gifting penalties are full of pitfalls. One wrong move — even with good intentions — can backfire. That’s why it’s so important to work with an attorney who understands long-term care planning and farm operations.  Also, start the conversation now. Don’t wait until a crisis hits. Planning ahead can make all the difference — for your peace of mind today, and for your farm’s future tomorrow.

For more information on LTC and the risks to farms, see Long-Term Care and the Farm, a bulletin available at farmoffice.osu.edu.