10 Dec Next Move? Continuing Care Retirement Community
If you or a family member are approaching the golden years you might be considering the option of a continuing care retirement community (CCRC). Also known as life plan communities they offer a range of residential units starting with independent living and increasing to varying degrees of assistance and long-term nursing care. A key selling point is once there, you never need to move because of declining health. The industry term for this is “aging in place”. Many find this appealing as it removes the worry about becoming a burden to one’s family and can provide peace of mind.
CCRC’s also provide a wide array of social and cultural activities and services that can make these years more enjoyable and provide a social network for a someone who is single, or a widow or widower. Most people move in when they are still healthy, active and independent; typically, the facility will have certain baseline physical and mental standards for entry that are required for independent living. There are also a variety of accommodations ranging from single-family homes to apartments or condominiums so that all lifestyle preferences can be met. Among the amenities offered are golf, libraries, cultural events and fitness centers. They appear to be upscale summer camps for senior citizens.
The downside? The costs associated with CCRC’s are high. First, there is the entrance fee which can range from $100,000 to $1,000,000. In addition, there are monthly charges starting at about $3,000/month and increasing to $5000/month or more. The services that are included in the monthly charges vary but most include meals, housekeeping and activities; other services may be available for an additional fee. These should be clearly enumerated as they vary from community to community. Typically, there are 3 different fee schedule options to choose from. Extended contracts offer unlimited medical care with no additional charge; these are the most expensive initially. Modified contracts provide some medical services for a period of time, but monthly fees increase when this period expires. Fee for Service contracts are the least expensive option initially; residents pay market prices for all healthcare services as needed. The good news is that seniors who itemize their taxes may be able to deduct a portion of these fees (both the entrance fee and monthly fee) as medical expenses on their taxes. The CCRC should give you guidance on this but discuss this with your CPA. These deductions can be particularly helpful in the year that you pay the hefty entrance fee.
CCRC’s are not licensed or certified by one entity so their services, contracts, fees, and staffing can vary widely from state to state. When contemplating where to look consider factors such as proximity to family and friends, quality of healthcare nearby and climate. These factors grow in importance as we age. Many facilities offer opportunities to stay on-site and test them out for a weekend or longer. This will allow prospective buyers to witness first-hand the demographics of the population, eat meals with the other residents and participate in social gatherings. Even though you may not currently need them, it is wise to spend time in the assisted living and nursing care sections of the facility and ask questions about their staffing ratios, inspection and licensing reports and any complaints that have been filed.
Since the purchase of a residence in a Continuing Care Community is a long-term commitment, it is critical to vet the facility and make sure that they are financially viable for the long haul. If you move in at age 70 will they still be operating in 20-25 years when you need them? They should have a strong balance sheet, good cash flow, and high occupancy levels. Remember that you are buying the promise of future care. Ask probing questions, get recommendations and do your homework.
When you have selected your perfect CCRC, we recommend having an elder law attorney review the contract before you sign on the dotted line so that you fully understand what you are buying and under what circumstances you may be able to leave and receive a refund. Refund clauses are specified in the contract and can be as low as 10% to as high as 90%. The refunds usually have stipulations about the time period (for example, 90% refund within the first 6 months) and whether the residential unit is occupied by a new owner after you leave. The contract will also specify at what rate your monthly fees can increase (typically these are running higher than inflation) and what your other rights are.
As the population ages these life plan communities continue to grow in popularity. They can be an excellent choice if you do your homework and understand what you are getting. Before you sign up here are some questions that you will want to ask:
- What are your policies on refunding entry fees? Does the housing unit need to be sold first?
- How will my monthly fees be impacted if I require nursing care?
- How have your monthly rates changed over the last 10 years? Is there any cap on increases?
- What services are included in my monthly fee and which will cost extra?
- May I see the audited financial statement for the CCRC?
- Is this a non-profit or a for profit facility?
- What are your occupancy rates?
- What happens if I run out of money? Is there any endowment or financial assistance available?
- What is the ratio of assisted living to independent residences? Will there be enough room for me when needed? What happens if they are full?
- What can you tell me about the background of management and staff? Do you do background checks? What is the turnover rate?
- Is there an Alzheimer’s unit or memory care services?
- Does the facility seem to be well maintained? Are there any building projects coming up that could impact you?
- How can residents participate in the facility’s decision making?
- What is the culture at this community (formal, casual, active)? Will I fit in here?
- What is the average age of the residential population?
Finally, it is wise to do some financial planning with your family to make sure that you can shoulder the on-going costs. A CFP® is a great resource and can assist the family with planning and projections for long-term care. Call us if we can help!