chisue, insurance companies don't make money strictly off policy premiums. AIG's current headline news is a perfect example of this. When I worked at CIGNA (formerly Connecticut General, then they bought INA and changed their name), each of their 5 separate divisions was given an annual profit margin target to hit. This was called a "zero margin plus xx%". Note this was not a sales number, it was a "quick and dirty" percentage of how much revenue minus division expenses they made annually. My boss (one of the regional VPs with a shot at the division presidency) got interested in exactly where this target number came from. He learned that what CIGNA called "zero margin" was actually a base 15% profit margin. CIGNA could earn 15% off its money, through investments and such things as real estate development (for instance they bankrolled Foster City, a landfill development in the SF Bay Area that was considered risky at the time, but is now a desirable mixed-use suburb, selling it after a few years for a hefty profit), without ever writing another insurance policy. Therefore, their divisions had to earn OVER that 15% profit margin, to be worth expending corporate funds for. This is why insurance companies go in and out of market niches - they tend to keep a fairly conservative eye on what their profit margins are on each line of business. When people are discussing the stock market, the majority of money in it is institutional. Insurance companies are a very large part of that. They are even better than banks at leveraging their money. We used to make jokes about actuaries, but insurance companies realistically suvive on the number-crunching abilities of their actuaries. Like developers in a software company, they are what actually drives the financial corporate engines.

>>(from luvstocraft) So am I understanding correctly that the Living Trust can help protect some of our assets--but just a Will will not do that? >> I'm sorry that I didn't pay more careful attention to some of these questions, and hope it's not too late to get these answers to luv since like her, we live in CA. First off, Living Wills are not legal in CA. The document needed is called the Durable Healthcare power of attorney. All forms since 2009 should include the POLST questions (Physician's Order for Life Sustaining Treatment). Anyone with a DHPoA prior to 2009 should Google and download this 1-page form, fill it out and give a signed copy to your doctor or HMO, ASAP. Second, as pointed out, you need to be careful about which type of Financial Power of Attorney you want. Be especially thoughtful about who is the successor agent should you **and** your spouse become mentally incapable. Make sure that all your financial records are filed properly and are easy to access in an emergency. Now, to wills vs trusts: A will MUST go through probate. This has certain advantages: a will is public record, meaning it's a lot harder (although not impossible) to commit fraud. If you don't have a large estate, there is nothing wrong with using a will. There are two kinds of personal trusts (well, there's many different kinds, but you generally need to have substantial assets to make use of them): Revocable and Irrevocable. In a revocable living trust (RLT), you or whoever is named trustee/co-trustee, own those assets and manage the trust. You can change the terms however and whenever you please. An Irrevocable trust is just that - once set up and funded with assets, it cannot be changed. The trustee is just a manager of the assets. It can't be canceled if you change your mind or your situation changes. You no longer own any of the assets in the trust. It is a permanent legal entity unto itself, until all assets are exhausted. Any trust must be funded; e.g., you must take legal steps to transfer assets to the trust. Just setting up a trust does not mean anything is inside the trust. Trusts do not go through probate. They are a method of passing assets to heirs without the costs of probate. OTOH, speaking as one who served as Executor of a simple estate, I can tell you that even a simple estate or trust takes hours and hours to settle. It is neither easy, nor simple, and when a person is grieving it is extremely exhausting. An Executor of a will gets paid a fee (and in CA, believe me that fee is earned) - but a Trustee NEVER gets paid unless payment, hourly or flat fee or percentage, is specified in the Trust....even though a Trustee can spend just as much personal time, if not more, than any Executor does, on settling an estate. Revocable Living Trusts will NOT save on taxes. They are a conveyance, a means of passing assets more efficiently in certain situations. They do not “protect” anything because that is not their intent. The only thing it will save is the court costs of filing for probate, and the mandated fees to Executor and Attorney from the assessed value of the estate. For example, my MIL has an RLT. Realistically, there was never any need for she and her (now deceased) husband to have one. They have only one son, had only one house, and modest financial assets. It made the transfer of assets to her as the surviving Trustee simpler, but then we had to have a lawyer draw up yet another trust, this time with her and her son (DH) as co-trustees. Had they had a good will drawn up instead, we could have continued with that and spent less half the amount of money it cost, by having her update a will instead of creating a new trust. In comparison, DH and I have a trust. We have no children, and our estate falls under whatever the federal estate tax limit is or is going to be. But because we have no children, our heirs are not directly related to us - and both heirs have siblings who by law would have just as much right to any inheritance. Therefore, we had our trust drawn up with specific language that excludes anyone not named in the trust. We also arranged for the Trustee to be paid on an hourly basis for work done for the estate, because we believe that's fair. I did a little research on the so-called "Medicaid trusts". These are apparently encouraged by certain lawyers who claim they will protect assets from being seized by Medicaid. There is a debate about this subject, and some lawyers say there is no current legal decision that fully supports any trust as being 'untouchable' by Medicaid. Whether this is true or not, I have no idea. A Medicaid trust is Irrevocable - once set up, you have lost all assets you transfer over. It is NOT excused from the Medicaid 5-yr look-back on asset transfers. If Medicaid does decide your trust is a fraud designed to hide assets from them, you would need a lawyer to file suit. And of course, no one should ever set up any trust, Revocable or Irrevocable, without the advice of a lawyer. Even using good forms, such as those available from Nolo Press/Berkeley, can produce a document that does not address all the issues your estate may face...if only because there are things you don't know which may be issues in the future, that the questions of a professional might have avoided. If you use a good estate attorney, they often charge a flat fee for drawing up the RLT, both PoAs, a pour-over will (VERY important) and even transferring the title to your home into the trust. Our attorney spent hours with MIL and with us, both together and separately, to ensure she had a clear picture of what we wanted. Then it was her job to create documents which would enable our wishes to be carried out, when we're no longer able to be there. I apologize for going OT. But these are critical issues that all too many Boomers have left undone for too long. HTH!

We bought LTCI last year at the ages of 49 and 51, and we're glad we did. I did not go into this with eyes half shut. I did uncountable hours of research, attended seminars, talked to people, interviewed agents, etc. I'm the type of person who doesn't allow anyone to talk me into anything - period. We bought a great policy through an A++ rated company, John Hancock. The average age one should buy LTC is 60ish - before health problems begin and the premiums are outrageous if you can even get it with certain conditions. I wasn't waiting 10 years to do so especially since our premiums would double by then even if we remain healthy...but who knows how our health will be in 10 years. Sure, we're healthy now and healthier than our parents were at this age, but no one has a crystal ball to determine how our health and at what age, will affect us. I'm not taking chances knowing DH's parents history. We have no kids or family that will care for us should we need it now or later, and to put 100% burden on the other spouse isn't fair, IMO. And even if we did have kids, who's to say they would want to interrupt their lives to care for sick parents. As cruel as this sounds, I prefer not to care for my mother as she's a difficult one now and she's relatively healthy. This LTC is piece of mind for us. While humans are living longer these days, from my research, it states that a very high percentage of people will require some kind of nursing home facility and the average time is 2.5 years. Should that time come now or later, the insurance is already there to be used. If we were to invest $$ for a rainy day to use toward this, it will take A VERY LONG TIME to match what insurance money is available to us NOW. We hope to never have to use it, but good to know it's in place if we have to, and we're lucky enough to be able to afford it. I realize many cannot. There's much to know about the various companies offering this including their ratings, how their policies work with the options & riders offered, claims stats, etc., and then choosing what is right for each individual. While most people tend to not think about LTC or discount it all together, I really think more people should learn about it and give it serious consideration. (No, I don't sell it). Frankly, IMHO, your sister is wise in thinking about her elder years that way.

It is good that you are starting to look now. There are several types of continuing care communities but I will only give you the basics. Some charge a residence fee and then a monthly maintenance. Both fees are called many things so the terminology may not be the same. The residence fee is basically purchase of a space on which you pay rent, maintenance, This fee can run into hundreds of thousands of dollars. There may or may not be a separate fee for dining. Some insists that for the first month or so that you must dine in the dining area. Others you may be charged for a set number of meals and you pay extra over that. Part of the selling spiel is that if you do not like the place you can recover part of your money. The clause in many is that the recovery is only after there is a new tenant. Any updates for the new tenant is taken from your fee. One place in Minneapolis I looked at they were refurbishing it for a new person and it had been vacant for two years. If the market is good the time should be much less than that. If the place becomes less desirable it could be longer. Some there is no fee to move in and there is a monthly fee with various add-ons such as dining, use of gym and swimming pool, certain activities, etc. The best ones, may not be more expensive, include every thing in one fee. Both types normally have both independent and assisted living facilities but normally they will be separated so look at both. Assisted Living: There is generally a base fee then you are charged additional for each level of care. You have to check your contract to see what is covered in a continuing care facility. In this state if you require two or more people to assist you must use a skilled nursing home facility. Most use a Hoyer lift but if you are heavy or unable to bend body parts and a one person operates the lift and the other places your body this is considered as needing skilled care. The final chapter: Nursing Home for if you really get sick. Some will allow you to remain in your living quarters or will move you to another area/building. However many do not have a skilled facility only assisted and independent. You would want to live in a community that has activities that allow you to go places rather than in house only activities like bingo, cards, etc. I did not like the continuing care facilities where you have a large upfront cost because I would worry too much about changes in management or bankruptcy of the facility. Both types of continuing care places will have annual increases in charges so what may be affordable now will be less so in 20 years from now. I do suggest that you start looking now so you see what is available and help decide what type of lifestyle you think you will like after retirement. You may even find one and move in before retirement.