If you and your wife are filing a joint tax return then the long term care reimbursement belongs to both of you so it is not taxable for her. If you do not have medical deductions to match the insurance payouts then they can become taxable, however.
If you want your wife to be able to claim income and be a deduction against the long term care then you can set your wife up as a household employee just as @robertb1326 details above.
@Winifred65454
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