All of us would love to pass on a decent-sized legacy to our heirs. But too many estates are all but entirely consumed by the high costs of medical care, especially as we get older.

Yes, we have Medicare to cover the major medical expenses of those Americans over age 65, but many people fail to realize that long-term and nursing home care is not covered under Medicare.

Medicare only pays for 100 days. After that, you will have to cover 100% of the costs for long-term care, either in a nursing home facility or in home health care.

Medicaid can help with basic expenses - but generally only after you have impoverished yourself by spending your assets down to less than $2,000 depending on your state.

Until then, you're going to have to either fund long-term care costs out of your own savings and pension income or have long-term care insurance in place.

The latter is the smart choice if you want to preserve your funds in retirement.

Chances of needing care

• 1 in 3 individuals who purchase a long-term care policy at age 60 with a 90-day elimination period (benefits kick in after 90 days of chronic disability) will need those benefits before they die.
• Half of everyone over 60 will have a need for nursing home or custodial care at some point during their lifetime.
• The average woman who needs long-term care spends 2.6 years in a facility. The average man who needs long-term care needs it for 2.3 years.
• 10% of those who enter a nursing home will stay there 5 years or more

The costs

The median annual rate for a semi-private room in a nursing home is $220 per day or $80,300 per year and increasing at 4% annually according to the latest "Cost of Care Study" by Genworth.

The median price of an assisted living facility is $43,200 per year, which is easily enough to consume most or all of a private pension and your Social Security income, as well as your retirement savings.

Medicaid requirements have teeth

If you have assets like a home, and receive Medicaid benefits, the state may place a lien on your home.

When you pass away, the state may seize your home out from under your heirs and sell it to recover any Medicaid benefits that were paid to you, under a State Medicaid Recovery Program.