Before You Sign a CCRC Contract: A Legal Checklist for Northern Colorado Families

Continuing care retirement communities, often called life plan communities, appeal to many Northern Colorado retirees for a simple reason. They offer independent living now, with assisted living, memory care or skilled nursing available on the same campus later. For families in Fort Collins, Loveland and the surrounding area, that promise of staying put as needs change can be a huge relief.

The paperwork behind that promise deserves as much attention as the floor plans. A residency agreement combines a housing decision, a health care decision and a major financial commitment in one document. It will shape what you pay, what care you receive and what eventually passes to your heirs. Here's what to check before you sign.

Start With the Contract Type

Most CCRCs offer some version of three contract types, although the names vary from state to state.

A Type A, or life care, contract usually carries the highest entrance and monthly fees. In exchange, residents can move into higher levels of care without large jumps in what they pay.

A Type B, or modified, contract typically costs less upfront and includes a set amount of care or discounted care. Beyond that, costs rise.

A Type C, or fee-for-service, contract generally has the lowest entrance fee, but residents pay market rates for assisted living or nursing care when they need it.

No single option suits everyone. The right choice depends on your health, your other assets and whether you already hold long-term care insurance. Because the decision affects how much of your wealth goes toward care and how much passes to your family, review it with your estate plan in front of you. It's worth having a local estate planning attorney, such as Minor Keele Parke Law, read the residency agreement before you sign so the contract, your will or trust and your powers of attorney all work together.

Understand the Entrance Fee Refund

Entrance fees usually follow one of three refund structures. Non-refundable fees are the cheapest upfront but return nothing to you or your estate. Declining refunds shrink over time. A fee that declines by 2 percent a month, for example, would be 88 percent refundable after six months and would reach zero after about four years. Partially refundable contracts guarantee a fixed share, often 50 or 90 percent, but cost more at the start.

Ask who receives the refund: you, your estate or a named beneficiary. Ask when it is paid, and whether payment depends on your unit being reoccupied. Ask what fees or charges can be deducted first. If your plans count on a refund passing to your children, those answers matter.

Know How Colorado Regulates These Communities

Colorado oversees what it calls life care institutions under Title 11, Article 49 of the Colorado Revised Statutes, with the Colorado Division of Financial Services handling the financial side. Under the division's rules, the provider must give you certain disclosures in writing before you sign a life care contract, and you must acknowledge them in writing no more than 14 days before signing. Providers also file annual reports with the state that include audited financial statements.

Use that as a starting point. Ask the community whether its agreement counts as a life care contract under the statute, and request its most recent audited financials, occupancy figures and a history of monthly fee increases. A financially healthy community is far better placed to keep its promises over a stay that may last decades.

Read the Fine Print on Moving Between Levels of Care

The care promise is the heart of a CCRC, so look closely at how it works in practice. Who decides when a resident moves from independent living to assisted living or memory care, and can the family challenge that decision? What happens if one spouse needs care while the other stays in the apartment? If no bed is available on campus, will the community arrange care elsewhere, and who pays for it?

Most importantly, find out what happens if a resident outlives their savings. Not every community guarantees continued residency in that situation, so get the policy in writing.

Update Your Estate Plan Alongside the Move

A move into a CCRC is a natural moment to revisit your estate planning documents.

Start with powers of attorney. Colorado adopted the Uniform Power of Attorney Act, and financial powers of attorney signed after January 1, 2010 are durable unless the document says otherwise. Check that your agent has clear authority to deal with the community, manage accounts and, if needed, sell real estate. Health care decisions are handled separately through a medical durable power of attorney, which lets your chosen agent make treatment decisions if you can't.

Next, look at your will or trust. If your assets sit in a revocable trust, find out whether the trustee can sign the residency agreement and whether any refund can be paid to the trust. Update beneficiary designations on retirement accounts and other insurance policies as well, since those pass outside a will. If you're selling the family home to fund the entrance fee, confirm how the title is held before you list it.

Don't Overlook the Tax Angle

IRS Publication 502 lets you include part of a life care fee, whether paid as a lump sum or monthly, in your medical expenses. The agreement must require the fee as a condition of the community's promise of lifetime care that includes medical care, and only the portion properly allocable to medical care counts. The community can usually provide a statement showing that figure.

Keep in mind that if you later receive a refund on an entrance fee you partly deducted, some of it may need to be reported as income. A tax adviser can help you plan the timing.

Before You Sign

A CCRC can bring real peace of mind, but only if the contract matches your expectations. Take the residency agreement home, read it with your family and have your attorney and tax adviser review it. Get every promise in writing. A few extra weeks of review is a small price for a decision that may shape the rest of your life and your family's inheritance.