The Naked Truth about CCRC Entrance Fee Refunds

Continuing care retirement communities market the entrance fee refund as a big selling point.  They try to make it sound like an easy transaction: You give them $100,000 to $1,000,000 up front, and they’ll return a portion of that fee to your estate when you die.  Since you’ll be selling your home to pay for the entrance fee, it’s not like it’s money you’ll miss, right?

Like most things in life, the truth isn’t that simple.  Entrance fee refunds are not the straight-forward transactions that CCRCs would have you believe.  In this post, I’ll share some of the hidden downsides of the entrance fee model, specifically as it relates to the entrance fee refund.

Be warned: This is kind of a dark subject, since it deals with what will happen after you die (or move out of the community).  But, for those who want to know, here are the facts.

Virtually all communities will have some waiting period after you pass. Obviously the manager of the CCRC won’t be standing over your bedside with a check waiting for your family the moment you pass away. But, you would except a check be presented to the estate within 30 days, right? Nope.  The truth is that your family may have to wait for a long time (in some cases over a year) for the refund to be processed.

Some communities require that your apartment be “resold.” In other words, your independent living apartment must be reoccupied by a new tenant.  How long does that take?  Could be months.  Could be years if the community has trouble filling the apartment.  And guess what?  Even after it gets reoccupied, the community usually has 45 days or more to cut your estate a check.

Some communities require that ALL of your apartments be “resold.” Spent a few months in assisted living and/or nursing? Those apartments must also be reoccupied by a new tenant before you get your check.

Refund policies vary if the apartment doesn’t sell. Some contracts stipulate a one-year maximum waiting period.  Others don’t say anything about when you’ll be getting a refund if apartments don’t sell.

No matter what’s in the contract, the community still has to have enough cash to pay it back. This seems like common sense, but most people don’t really think about it.  Your entrance fee refund is 100% dependent upon the community being in the financial situation that would allow them to pay you back.  While most states have laws requiring that CCRCs keep a certain amount of cash on hand for refunds, this can be put in danger if the community is in financial difficulty. Thankfully, this has been a rare occurrence historically.

Want to protect yourself? There’s two main things that you can do:

  • Check your contract. The resident agreement will contain a detailed description of how the community plans on paying you the balance of the fee.  If it’s important to you that your estate get the refund in a timely manner, then pay particular attention to this section of the agreement.
  • Don’t move in if the terms aren’t favorable. For too long, CCRCs have made all of the rules when it comes to resident agreements.  It’s worked out for the most part, but some seniors have gotten seriously burned when communities went bankrupt. While the CCRC lifestyle makes it tempting to overlook things like the entrance fee refund policy, I believe that seniors have the power to express their displeasure and be a force of change in the industry.

Want to learn more about CCRCs? Check out some other posts:

Who owns CCRCS?

What is adult daycare?

What is memory care?

Why pushing for a move to senior housing isn’t a good idea.