With escalating costs, health care has become a critical part of retirement planning. But health expenses are not limited to acute care. Many people may need long-term care, which can quickly reduce or drain household assets if you or your spouse goes to a nursing home.

If clients intend to pass along their home and other assets to heirs, they may want to consider long-term care insurance as part of overall estate planning.

Nursing home and adult day care costs are both rising. A 2012 MetLife survey found the average daily rate for a private room in a nursing home was $248, up from $239 daily in 2011, increasing at a pace exceeding inflation in 2012. The average monthly base rate in an assisted living community rose to $3,550 in 2012, from $3,477 in 2011. That cost was equivalent to more than $42,000 annually. And while hourly rates for home health aides remained unchanged, the rate for a homemaker, to provide non-medical services,increased 5.3% to $20 per hour in 2012.

Source: MetLife Market Survey of Nursing Home, Assisted Living, Adult Day Services, and Home Care Costs, 2012.

Long-term care insurance may cover the costs of not only a nursing home, but also home care or adult day care services. Depending on the plan details, long-term care insurance may cover some of these expenses and help a client keep assets from being redirected to pay for nursing home costs.

The purchase of the insurance may also be considered a medical expense. Clients who have medical expenses that exceed 10% of adjusted gross income and who itemize tax deductions may be able to deduct a portion of the insurance premium. The IRS sets limits for the deduction based on age.The IRS also set an exemption for seniors. For taxpayers who are age 65 years old or older, the threshold remains at 7.5% of AGI through 2016.

In addition to health-care costs, clients may want to learn more about long-term care insurance and how it may benefit their individual financial situation.