In case you missed it the first time, here’s an overview of CCRC entrance fees and refundabilities:
CCRC’s have a unique fee structure: you pay an entrance fee when you move in and then monthly fees.
Types of Refundabilities
There are two common types of refundable contracts: defined refundability and declining refundability.
The vast majority of communities offer the first type: a 90%, 50% or 0% refundable contract. For example, a resident choosing a 90% refundable contract that pays a $100,000 entrance fee would receive $90,000 (90% of $100,000) upon completion of the contract.
As it sounds, a declining refund plan provides a declining refund based on the length of time that a resident has been in the community. Most plans offer stipulations such as “the contract is 90% refundable upon entrance to the community and then amortizes 4% a month until the remainder of the entrance fee has been exhausted.” In some communities, declining refund plans also offer benefits should a resident need to move to assisted living or nursing. Generally, the resident’s entrance fee acts as an endowment and can be applied against the cost of care.
CCRC entrance fee contracts are not the same as condominium pricing where residents own their units and a percentage ownership in the common spaces. CCRC residents do not actually own their unit. Instead, they have an exclusive agreement with the community to use the residence and the common grounds for the rest of their lives.
The refundable portion of the entrance fee is due when the resident either moves out of the community or passes away. Most CCRC’s have a clause in the resident contract whereby the resident or the resident’s estate will not receive a refund until the resident’s independent living apartment has been resold. This practice was common a few years ago, but due to the recession, state legislatures have been cracking down on communities denying refunds to residents on the basis on apartment resale because it has been taking CCRC’s much longer to resell the unit. Most communities offer a compromise: the balance of the entrance fee is refundable if the unit has not been resold at the end of one year.
Monthly fees vary depending on the community and the contract. Common services include: daily meals or a monthly meal plan, weekly or biweekly housekeeping, cable, telephone, internet, resident activities, and covered parking. There are several variations on the services provided.
Some communities have cottages or duplexes on the property that have lower monthly fees but do not offer the same services. These contracts are often marketed to younger, more independent seniors and offer a lifestyle that is almost like living outside a retirement community. In contrast, independent living apartments often offer more services.
Since the economic downturn, many CCRC’s are now starting to offer rental contracts. Since retirement communities prefer a large up-front entrance fee, rental contracts are priced such that most residents are better off choosing entrance fee contracts. However, for some people, rental pricing can be a good alternative and can offer benefits of CCRC living without the entrance fee.