Real-World Case Studies: Hybrid Policies Used to Protect Multigenerational Wealth

Hybrid life / long-term care (LTC) policies—also called linked-benefit or life-with-LTC riders—are increasingly used by high-net-worth (HNW) families in the United States to protect multigenerational wealth against catastrophic long-term care costs while preserving estate transfer objectives. Below are practical case studies from three U.S. markets, with strategy, numbers, and product considerations you can use when counseling HNW clients.

Why hybrids matter for HNW estate planning (quick primer)

• Dual purpose: Combine a life insurance death benefit with an LTC pool or accelerated benefit. If LTC is never needed, heirs receive the death benefit. If the insured needs care, benefits pay for care expenses.
• Wealth preservation: Hybrids can shield investment portfolios and real estate from care-driven spend-downs that would otherwise erode inherited wealth.
• Tax and liquidity: Death benefits generally pass income-tax free to beneficiaries; many designs also offer faster liquid access to funds for care needs than selling illiquid assets.
• Medicaid/Miller Trust considerations: Properly structured (often using trusts or ILITs), hybrids can be integrated into Medicaid planning to reduce risk of spend-down and unintended estate inclusion.

Authoritative cost context: Genworth’s Cost of Care survey shows U.S. median annual nursing home costs around the six‑figure range—Genworth reported a national median for a private nursing home room of about $108,405/year (latest national survey) — a clear driver for using hybrids rather than relying on portfolio drawdowns. Genworth Cost of Care

Case Study 1 — San Francisco Bay Area: Protecting a Family Office (age 68 married couple)

Client profile

• Couple age 68, net investable assets $25M, multigenerational LP interests and San Francisco real estate.
• Objectives: Protect LP distributions and SF residential real estate from LTC spend-down, preserve liquidity for next-gen trusts, minimize estate tax leakage.

Strategy deployed

• Purchase two single-life hybrid policies with LTC pools using a partial single premium + limited-pay structure to avoid a large one-time cash outlay to the family office.
• Policy selection: Lincoln Financial MoneyGuard–style linked-benefit (market leader for wealthy clients seeking guaranteed LTC pooling with death benefit features). (See Lincoln MoneyGuard for product details.) Lincoln Financial MoneyGuard
• Funding: Each spouse pays a 10-pay premium stream (10 years of premiums) rather than a single-pay deposit. This preserves some portfolio liquidity and spreads the cost across the family office budget.

Illustrative pricing (market-typical ranges, 2024)

• 68-year-old non-smoking female, 10-pay to cover a $750,000 LTC pool / $750,000 death benefit — annual premium approximate: $28,000–$40,000.
• 68-year-old male, same design — annual premium approximate: $25,000–$36,000.
  (Actual pricing varies by underwriting class and product; brokers obtain illustrations. See hybrid product analyses for typical cost drivers.) Forbes Advisor: Hybrid Life Insurance

Why this worked

• If one spouse needs care for 3–6 years (Bay Area nursing/memory care averages well above national medians), policy benefits pay care costs, preserving LP distributions and real estate value for heirs.
• If neither spouse uses LTC benefits, the death benefit transfers directly to the next generation (ILITs used for estate tax planning).
• The 10‑pay structure matched liquidity preferences of the family office while limiting surrender/exposure risk compared with extended lifetime payments.

Key documents and trust interplay

• Policies owned by a properly drafted Irrevocable Life Insurance Trust (ILIT) to remove the death proceeds from taxable estate (see combined strategies below).
• Policy design included a survivor treatment clause to ensure the surviving spouse retains coverage (see Policy Design considerations below). Internal guidance: Combining Hybrids with ILITs and Trusts to Optimize Tax and Medicaid Outcomes

Case Study 2 — Palm Beach / Miami, FL: Protecting real property and gifting plans (age 62 single)

Client profile

• Single, age 62, net worth $18M concentrated in Florida real estate and family LLC.
• Objectives: Preserve Florida real estate (illiquid) for heirs; establish multigenerational gifting while maintaining liquidity for care.

Strategy deployed

• Single-premium hybrid (SPHL) funded from sale proceeds of a secondary property: purchase a single-pay linked policy providing a $1,000,000 LTC pool / $1,000,000 death benefit.
• Company used: Competitive options include several large life insurers offering single-premium hybrids; Nationwide and Mutual of Omaha also market hybrid solutions (product names vary by carrier).
• Single-pay pricing (illustrative): $350,000–$650,000 for a healthy 62-year-old for a $1M combined pool/death benefit (market dependent, subject to underwriting).

Why this worked

• Single premium locks interest rate crediting and LTC benefit pool; avoids future premium payment risk and reduces chance of lapse.
• Frees LLC distributions and real estate income for legacy purposes; prevents forced asset sales in a LTC event.
• In Florida, Medicaid look-back and asset protection rules make proper trust ownership and timing critical; single-pay hybrids often coupled with trust counsel review.

Case Study 3 — Manhattan, New York: Sibling-owned dynasty planning (ages 60 & 63)

Client profile

• Two siblings (ages 60 and 63) own a family office with $40M AUM, expecting multigenerational transfer via dynasty trust. Both expect longevity but worry about Alzheimer’s risk (family history).

Strategy deployed

• Survivorship (second-to-die) universal life policy with an accelerated LTC rider that allows pooled LTC benefits on first claim and preserves remainder death benefit for heirs.
• Carrier selection: Some life carriers (MassMutual, Prudential) permit LTC riders on survivorship structures; product design varies and requires careful underwriting documentation.
• Pricing: Survivorship hybrids are typically less expensive on a per-insured basis than two single-life hybrids. Example: 60/63 joint survivorship with a $2M combined benefit and LTC rider — single-pay equivalent or limited-pay could range roughly $450,000–$900,000 depending on health and rider specifics.

Why this worked

• Preserves dynasty trust funding: if neither sibling needs LTC, heirs receive full death benefit after the survivor’s passing.
• If one sibling needs care early, rider access provides benefits while preserving enough legacy for trust funding.
• Important trade-off: survivorship structures generally don’t pay full death benefit until second death; careful liquidity planning for first-to-die care is essential.

Comparative snapshot: Policy design and cost drivers

Note: numbers are illustrative, dependent on age, health, benefit ratio, and carrier crediting assumptions. For carrier-specific designs and illustrations, consult underwriting and product literature. See product-specific overview: Hybrid Life/LTC Policies: Protecting HNW Family Wealth from Long-Term Care Shocks

Tax & estate considerations (practical checklist)

• Federal estate tax exemption (2024): $13.61M per person — union of planning with hybrids must consider current exemption and portability if relevant. (Confirm current IRS figures at time of planning.)
• Ownership matters: If the insured retains incident of ownership, death proceeds may be includable in estate; ILIT ownership is typically used to exclude proceeds.
• Gift-tax considerations: Single-premium transfers to trusts may trigger gift tax unless structured correctly (Crummey powers, QTIP, or other mechanisms).
• Medicaid look-back: Hybrid payouts can affect Medicaid eligibility; timing and ownership planning (e.g., irrevocable trust, annuitization caveats) are essential. For contract-level triggers and pooling, see: Policy Design: Benefit Triggers, Pooling, and Survivor Treatment in Life/LTC Hybrids

Underwriting tradeoffs, exit strategies, and best practices

• Underwriting: Age and health materially influence cost—younger, healthier clients receive better pricing and richer benefit ratios.
• Exit strategies: Understand surrender charge schedules, reduced paid-up options, and portability in the event of premium nonpayment. Plan for potential future needs to avoid forced lapse.
• Modeling: Run stochastic LTC cost models using local cost data (Genworth) to compare hybrid vs self-insure vs standalone LTC purchase. See modeling guidance: Modeling Long-Term Care Costs and How Hybrid Policies Can Preserve Net Family Wealth

Sources & further reading

• Genworth Cost of Care Survey (national medians): https://www.genworth.com/aging-and-you/finances/cost-of-care.html
• Forbes Advisor — Hybrid life insurance primer and cost drivers: https://www.forbes.com/advisor/life-insurance/hybrid-life-insurance/
• Lincoln Financial — MoneyGuard product information and illustrations: https://www.lfg.com/moneyguard

If you’re advising HNW clients in New York, California, Florida (or other high-cost LTC markets), hybrid structures can be a compelling tool to manage care risk while preserving intergenerational wealth. Integrate product selection, underwriting timing, trust ownership (ILITs), and exit strategies early in the estate plan to achieve the desired transfer and liquidity outcomes.