Creative Ways to Pay for Long-Term Care in 2026: Beyond Draining Your Savings
Financial and insurance review by Michael Banner
Most families assume there are only two ways to pay for long-term care: spend your savings, or spend down until Medicaid takes over. In reality, there are many more options, and the families who fare best usually combine several of them.
This guide walks through the creative ways families pay for care in 2026, what each one costs you, and when it makes sense. If you first want to know what care costs, see our guide to long-term care costs by state.
Start With Your Care Runway
Before choosing a strategy, find out how long your current income and savings can cover care. A nursing home now runs about $9,581 a month nationally, and assisted living about $6,200. That number tells you how big the gap is and how much you need from the options below. Our free care affordability calculator shows your monthly gap and how many months your money lasts.
How long could your savings pay for care?
Enter your savings, income, and care type to see your care runway and monthly gap.
Try the Affordability Calculator →1. Use Home Equity Without Moving
For many families, the home is the largest asset. You can use it to pay for care without selling it.
- Reverse mortgage (HECM): Homeowners 62 and older can turn equity into a lump sum, monthly payments, or a line of credit. Nothing is repaid until the home is sold or the owner passes away. It works best when the goal is to stay at home.
- Home equity line of credit (HELOC): Borrow only what you need, often at a lower rate than other loans. Useful for home changes like ramps or a first-floor bedroom.
- Sale-leaseback: Sell the home to an investor and rent it back, freeing up cash while you stay put.
- Renting out a room or the home: If a parent moves to assisted living, rental income can help cover the monthly bill.
2. Turn Life Insurance Into Care Money
- Accelerated death benefits: Many policies pay part of the death benefit early for a chronic or terminal illness.
- Policy loans: Borrow against the cash value of a whole or universal life policy. See our guide to whole life insurance for long-term care.
- Life settlement: Sell a policy you no longer need for more than its cash value.
- Hybrid policies: Life insurance or annuities with a long-term care benefit built in. Compare them in hybrid life and long-term care insurance.
Not sure which of these fit your situation? Our long-term care financial tools explain accelerated death benefit riders, reverse mortgages, annuities, and asset protection side by side.
Compare financial tools for care
See how life insurance riders, annuities, reverse mortgages, and trusts work, with pros and cons for each.
Explore Financial Tools →3. Pay a Family Caregiver the Right Way
When an adult child or relative provides care, a written family caregiver agreement lets you pay them a fair hourly rate. It also documents that the money is wages, not gifts, which helps protect Medicaid eligibility under the 5-year look-back. Learn the steps in how to set up a family caregiver agreement.
Many states also pay family caregivers directly through Medicaid self-directed programs. See which programs exist in your state in our caregiver compensation guide.
4. Layer In Benefits Families Often Miss
- VA Aid and Attendance: In 2026, eligible wartime veterans can receive up to $2,424 a month, a veteran with a spouse up to $2,874, and a surviving spouse up to $1,558. See the Veterans Guide.
- Medicaid home and community-based waivers: Many states pay for in-home care or personal care in assisted living, sometimes before full nursing-home eligibility. Check your state in the Medicaid Guide.
- Medicare GUIDE model: For people living with dementia, some participants get care navigation and respite help.
- Local help: Area Agencies on Aging, nonprofits, and faith groups offer respite, meals, rides, and adult day programs at low or no cost. Browse nonprofit assistance.
5. Bridge the Gap While Other Money Arrives
- Short-term care insurance: Covers up to about a year of care, with simpler health questions than traditional coverage. Learn more in short-term care insurance.
- Bridge loans: Short-term loans can cover an assisted living move-in while a home sells or a VA claim is processed.
6. Use Taxes to Lower the True Cost
- Medical expense deduction: Qualified care costs above 7.5% of adjusted gross income can be deducted if you itemize.
- Health Savings Accounts: HSA money pays qualified care costs tax-free.
- Dependent care credits: If you pay for a parent's care so you can work, you may qualify for a tax credit.
Creative Payment Options Side by Side
| Option | How it works | Upside | Watch out for |
|---|---|---|---|
| Home equity | Reverse mortgage, HELOC, sale-leaseback, downsizing | Unlocks your largest asset | Fees, interest, less left to heirs |
| Life insurance | Accelerated benefits, policy loans, life settlement | Turns a policy into care money | Lowers or ends the death benefit |
| Family caregiver agreement | Written contract paying a relative for care | Keeps care in the family, documents payments | Wages are taxable income |
| Public benefits | VA Aid and Attendance, Medicaid waivers, Medicare GUIDE | Ongoing monthly help | Eligibility rules and waitlists |
| Bridge funding | Short-term care insurance, bridge loans | Covers a gap while other money arrives | Short time limits, interest |
| Tax strategies | Medical expense deduction, HSA withdrawals | Lowers the true cost of care | Must itemize, keep records |
Important Things to Keep in Mind
- Medicaid looks back 5 years at gifts and transfers in most states, so plan early.
- Some options, like reverse mortgages and life settlements, can affect benefits or what heirs receive.
- Talk with an elder law attorney or financial advisor before moving large assets.
Frequently Asked Questions
What are creative ways to pay for long-term care?
Creative ways to pay for long-term care include using home equity without moving (a reverse mortgage, HELOC, or sale-leaseback), turning life insurance into care money (accelerated death benefits, policy loans, or a life settlement), paying a family caregiver through a written agreement, and adding benefits such as VA Aid and Attendance, Medicaid home and community-based waivers, and medical tax deductions. Most families combine two or three of these.
Can I sell my life insurance policy to pay for long-term care?
Often, yes. A life settlement lets you sell a policy you no longer need to a third party for more than its cash surrender value but less than its death benefit. It usually works best for people over 65 with a policy of $100,000 or more. Proceeds can be taxable and can affect Medicaid eligibility, so talk with a financial advisor first.
Can a reverse mortgage pay for in-home care?
Yes. A federally insured reverse mortgage (HECM) lets homeowners age 62 and older turn home equity into a lump sum, monthly payments, or a line of credit that can pay for in-home care. You must live in the home as your main residence, so it fits best when the goal is to age in place, not move to a facility.
Can I pay a family member to be a caregiver?
Yes. A written family caregiver agreement sets the duties, hours, and a fair hourly rate. It documents that payments are wages, not gifts, which helps protect Medicaid eligibility under the 5-year look-back. Many states also pay family caregivers directly through Medicaid self-directed programs or VA caregiver programs.
Are long-term care costs tax deductible?
Qualified long-term care costs can count as medical expenses. Under IRS Publication 502, you can deduct medical expenses above 7.5% of your adjusted gross income if you itemize. Health Savings Account funds can also pay qualified care costs tax-free, and part of a qualified long-term care insurance premium may count as a medical expense.
How LTCareNav Can Help
LTCareNav brings costs, benefits, and payment options together in one free care plan. Start with the Quick Quiz, or check your numbers with the affordability calculator and compare options in our financial tools.
Get Your Free Care PlanSources & references
- Centers for Medicare & Medicaid Services — Long Term Care
- Centers for Medicare & Medicaid Services — Index
- U.S. Department of Veterans Affairs — Aid Attendance Housebound
- Centers for Medicare & Medicaid Services — Cms.Gov