The 2% Conversation: Long-Term Care Planning for Affluent Clients
At Watermark, we hear it all the time: “I’ll just self-fund long-term care.”
And for many high-net-worth clients, that’s true — they can. But that’s not the point. The better question is: Is that the most efficient way to use your capital?
When “I Can” Isn’t the Same as “I Should”
Self-funding long-term care often looks simple on the surface. In reality, it can quietly disrupt an otherwise well-designed financial strategy.
Here’s what tends to get overlooked:
Timing risk
Care events don’t wait for favorable markets. Assets may need to be sold when values are down.Tax friction
Pulling from investments can trigger capital gains or increase overall tax exposure.Legacy tradeoffs
Funds intended for family or future planning priorities can be consumed by care costs.
This isn’t about affordability — it’s about efficiency and control.
A Smarter Way to Allocate
We often guide advisors toward a simple reframing:
What if solving for long-term care didn’t require a large shift — just a more strategic one?
In many cases, repositioning a small portion of a client’s portfolio — often around 1–2% — can create a dedicated pool of assets specifically for care.
Not by adding more risk.
By redistributing it more intentionally.
Why This Approach Works
A modest reallocation can fundamentally change how a portfolio responds to a long-term care event.
It creates separation
Care expenses are handled by a designated pool, not the broader portfolio.
It improves tax efficiency
Instead of liquidating taxable assets, clients can access benefits designed to minimize tax impact.
It introduces leverage
A relatively small repositioning can unlock significantly greater resources for care.
It preserves the rest of the plan
The remaining portfolio stays focused on growth, income, and legacy — uninterrupted.
It’s Not About Replacing Self-Funding
This is where the conversation becomes more meaningful.
We’re not telling clients not to self-fund.
We’re helping them self-fund more intelligently.
By isolating a small percentage of assets for long-term care, clients gain:
Greater predictability
More control over how and when assets are used
Protection against unintended ripple effects across their financial plan
The Watermark Perspective
Planning for long-term care isn’t a product conversation. It’s a portfolio strategy conversation.
The most effective plans aren’t built on whether a client can absorb a cost, they’re built on whether they should absorb it that way.
A small adjustment today can protect everything else working beneath it.
A Better Question to Ask
Instead of asking: “Do I need long-term care coverage?”
We encourage a different question: “What’s the most efficient way to protect my portfolio if care is needed?”
That shift is where better planning begins.