The Continuing Care Retirement Community – Is It Too Good To Be True?

Estate Planning For Maryland and Washington DC - Continuing Care Retirement Community


My elder law clients often seek my counsel about whether moving into a Continuing Care Retirement Community (CCRC) is the right next step for them. The Washington Metropolitan area is home to many beautiful and well run CCRCs. However, CCRCs are costly. Before making a large and unsecured investment in a CCRC, I strongly urge my clients to do their due diligence. This article explains what a CCRC is, how it operates, and why due diligence is so important before making a commitment to live there. CCRCs are often the best living choice for my senior clients, but that is because they understand the contract they are entering into and do so fully informed of the potential risks involved.

What is a Continuing Care Retirement Community (CCRC)? A CCRC is a type of retirement community where the full spectrum of senior care from independent living, assisted living and nursing home care is provided in a single community setting. CCRCs offer independent living units such as apartments, townhouses, or small single-family homes for incoming residents who are relatively healthy and self-sufficient. They provide convenience services including meals, housekeeping, and laundry, as well as amenities such as fitness centers, restaurants, libraries, and health clinics. Residents are moved to the CCRC’s assisted living unit when they are in need of assistance with the activities of daily living such as dressing, bathing and eating. When residents need 24 hour monitoring and skilled care by nurses or other medical staff, they are moved to the nursing care unit. The various levels of shelter and care can be housed on different floors of a single high-rise building or in physically adjacent buildings of a campus like setting.

The CCRC provides lifelong housing, household assistance and nursing care in exchange for a sizeable entrance fee and ongoing monthly fees. Entrance fees vary from $100,000.00 to $1,000,000.00 and monthly fees vary from $1,000.00 to $5,000.00 depending on the size of your independent living unit and the number of occupants.

The Benefits of a CCRC: The most attractive feature of a CCRC is that it allows you to move among and through independent living, assisted living and skilled nursing care in one community. A CCRC offers you an independent life style for as long as possible, but also provides the reassurance that, as you age or become sick or frail, you will receive the care you need within the community. You will begin your residency in an independent living apartment, where you will have the freedom to live much as you did in your own home. A wide range of activities and amenities are generally provided for your recreation and well being. The CCRC allows spouses or partners to be together in the same community when one’s health declines and requires a different level of care. The community setting reduces isolation and provides companionship among its residents.

Type of Agreement: CCRCs across the country follow several different models of operation. The CCRC contract is a legal agreement between you (the resident) and the CCRC. This agreement generally secures living accommodations and services, including healthcare services, over the long term. The most common types of CCRC agreements all require entrance fees (in varying amounts) and are as follows:

• Type A (Extensive) Agreement: Includes housing, residential services, amenities and unlimited, specific health-related services with little or no substantial increase in monthly payments, except to cover normal operating costs and inflation adjustments.

• Type B (Modified) Agreement: Includes housing, residential services, and amenities and a specific amount of healthcare with no substantial increase in monthly payments, except to cover normal operating costs and inflation adjustments. After the specified amount of healthcare is used, persons served pay either a discounted rate or the full per diem rates for required healthcare services.

• Type C (Fee-for-Service) Agreement: Includes housing, residential services, and amenities for the fees stated in the resident agreement. Access to healthcare services is guaranteed, but it may be required at full fee-for-service rates. (This is the most common type of agreement found in Montgomery County, Maryland.)

Entrance Fee Refund – Read the Fine Print. You will be told that your Entrance Fee is 100% refundable when you terminate the contract by moving out of the community or upon your death. However there are factors that will impact the amount and timing of your refund.

Your refund can be decreased by any amounts you accessed from the entrance fee when you were transferred to an assisted living or nursing care unit. When you are transferred to such units in the community, the contract may permit you to reach in or access your entrance fee to pay a portion of those costs. In addition, the entrance fee refund will be decreased by any unpaid fees due the CCRC for your care or otherwise.

Upon termination of your contract, your refund will not be paid until your independent living apartment has been occupied or reserved by another who paid an entrance fee. For example, if it takes the community a year or two to market and reoccupy your apartment, the community is under no obligation to refund your entrance fee. A reduction in occupancy levels can mean that you, as a former resident, or your family have to wait longer than expected for the refund.

You are an UNSECURED creditor. Your rights are primarily for services, with a contractual right to occupancy. You have no right, title or interest in any part of the personal or real property owned or administered by the CCRC. Should the CCRC face financial distress or bankruptcy, you are at a great disadvantage because your entrance fee is not protected. Any claim you have is subordinate to the claims of secured creditors such as tax exempt bond holders and mortgage lenders. You will be grouped with all other unsecured creditors, which generally includes everyone who does business with the CCRC for recouping any financial loses.

Be aware of the price you pay to gain entrance to CCRC – Due Diligence. Moving into a CCRC involves great financial and emotional investment. Many seniors sell their homes, which are often their primary asset, to pay for the required entrance and ongoing monthly fees of a CCRC. As a result, their ability to support themselves in the long run is inextricably tied to the long term viability of their CCRC.

Once a resident, you may find that the community is not what you thought it would be and your options to move out are limited due to the financial expenditure (entrance fee) you made to enter the CCRC. Generally, you are not entitled to a refund of your entrance fee until your unit is occupied by a new resident who paid an entrance fee. This may mean that you lack the funds necessary to move somewhere else while you wait for your refund. So, it is vitally important that you thoroughly investigate the CCRC before you commit to moving in.

From all appearances these communities are lovely and the benefits bring great peace of mind. But do not end your investigation of the CCRC after simply viewing the independent living units and amenities. Ask to see the actual assisted living and nursing care units. Make sure you take a tour of the health care facilities to get a feel for the quality of care. Ask for references from families whose loved ones were residents of the nursing and assisted living facilities. Ask to review any survey ratings from the Maryland Department of Aging or organizations rating the quality of care in the assisted living and/or nursing care units of the CCRC. Know the additional costs you will incur when transferred to the assisted living or nursing care unit. Make sure you read and are willing to abide by the CCRC’s Rules and Regulations.

Finally, seek out the counsel of an elder law attorney such as Mary Jo Broussard Speier of The Speier Law Firm to review the CCRC contract before you sign it. She will explain the contract terms to you in plain English so you can understand the fine print and can make an informed decision about your future.

This brief overview of some important considerations associated with Continuing Care Retirement Communities is by no means comprehensive. Always seek the advice of a competent professional when making important financial and legal decisions.

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