Photo courtesy of NobMouse on Flickr
When you begin seriously considering moving into a continuing care retirement community (CCRC), the marketing agent should give you a copy of the community’s disclosure statement.
Most states require that disclosure statements be written in “plain English.” CCRC’s are required to provide prospective residents with a copy of the community’s disclosure statement prior to signing the resident contract. Additionally, residents should receive an updated copy of the disclosure statement on an annual basis.
Here are some of the things you’ll find in a typical disclosure statement:
- Name of business and address
- Name of owners and/or trustees
- Manager information: Some communities are managed by separate management companies, which are listed in the disclosure statement. This is relatively common and not a particular cause for alarm.
- Description of services provided: The section will list housing, services, and other activities for which the community charges a fee.
- Affiliation, if any: If the community is affiliated with a church or other organization, the affiliation will be listed.
- Description of laws governing the community: The community is regulated by state and federal governing bodies, which will be listed here.
- Financial statements: Audited financial statements for the last year or more are required.
- Description of resident fees: How does the community charge residents? What are the monthly fee and entrance fee requirements?
- Reserve funding provisions: Most states require that CCRC’s keep extra money on hand in either a trust or an escrow account so that it can pay residents and their families the entrance fee refunds. This section will include a description of extra funding on hand.
- Description of long-term financing: If the community has borrowed money for construction or other projects, the terms of the note and the payment amounts will be listed.
It’s difficult for someone who has never been exposed to finance or accounting to review a community’s disclosure statement and be able to draw any good conclusions. However, asking your financial advisor or accountant to review the documents is probably a good idea. Additionally, keeping an eye on the annual disclosure statement can help you understand community operations and financial stability.