Where's Your Money going? Fees You'll See at a Continuing Care Retirement Community
This article discusses the fees and prices associated with living at a CCRC. There are different types of payment structures and fees to consider when picking Type A versus Type C facilities. Below will discuss what you can expect to pay for entrance fees and what happens to these fees in the future.
CCRC Price Sheets
At some point in your CCRC (Continuing Care Retirement Community also known as a LifePlan community) search you will come face to face with the price sheet. Hopefully the sheet lists entrance fees and monthly fees for each unit you are considering at the CCRC. Unfortunately not all price sheets will be this well organized. Some CCRC issue a "summary price sheet" with the goal of not overwhelming you with numbers. This may work, but it really hides data you or your financial advisor will need to make a good decision. Above all, be sure to understand if the CCRC follows a Type A, B, or C model, or a different model all together.
Other CCRCs have different price options and have multiple price sheets. An example is one set of monthly fees for a 90% refundable entrance fee and a separate set of lower monthly fees for an 80% refundable entrance fee.
Finally we have some of the more ridiculous price sheets that discuss miscellaneous fees such as the barber's fee and the fee to change a light bulb in your residence ( see other blog post on this topic ). Try not to get bogged down on these type of fee sheets and focus on the big numbers.
Study The Big Fees On Your CCRC Price Sheet
At some point during your CCRC search you will come face to face with the sheet of costs and fees. You can see fees in excess of $100,000+ for entrance fees, fees of several thousand dollars for monthly fees, and other miscellaneous fees as well. After looking at hundreds of CCRC fee sheets we're surprised that often low item fees are listed. Some fees like the barber shop fee or the manicure fee are included for a comprehensive fee sheet.
Our advice is to ignore these small fees. The price of a hair cut is almost meaningless when compared with a $300,000 entrance fee. Concentrate on the big impact fees of entrance fee, refund-ability of entrance fee, monthly fee, and if the monthly fee changes for higher levels of care.
True fact! One list of fees listed a $3 charge for an in-home visit to change a light bulb. The fee increased a few dollars if the light bulb was a 100 watt bulb.
Type A Versus Type C Payment Structures
While ideally potential residents should apply to a CCRC when they are in good health, it is possible that a couple may have one person in slightly less good health when an application goes in. If this is the case you may have better success with Type C facilities versus Type A facilities. Type A facilities tend to have tougher medical qualifications versus Type C facilities. With Type C facilities the monthly fee increases when assisted or nursing care is required. With Type A facilities the monthly fee does not increase at assisted or nursing periods. Type C's may be able to be more forgiving with a few health problems due to this payment factor.
CCRC Entrance Fee For Your Spouse
The entrance fee of a CCRC can often reach several hundred thousand dollars and is a major component on the decision to move to a CCRC or not. If you plan to move to a CCRC with your spouse, there may be an additional but lesser entrance fee tacked on. This secondary entrance fee is usually much less then the primary entrance fee but often is not refundable as the main entrance fee would be. If you are not married you may able to share your independent living home with a sibling or friend if the CCRC allows for this.
How A CCRC Gains From Entrance Fees Even If They Are Refundable
Some CCRC entrance fees, particularly at Type A communities, are refundable at death in amounts of 90%, 80%, or some other amount. This sounds like a good deal as most of your money will be returned to your heirs but remember that while your entrance fee is in the hands of the CCRC you will not have access to it nor will you earn interest on that money. In fact, the CCRC will invest your entrance fee with the goal to earn income on it for as long as possible.
Refunds Of Nonrefundable Entrance Fees
You may read in your contract that a non-refundable entrance fee is actually partly refundable over a 5 year, 8 year, or other length period. Think of this as "just in case insurance". Your goal, usually, is to live at a CCRC for a long time, or as some say, it is the last move of your life. The refund period may ease your nerves about handing over a large check but in practice if you live at the CCRC for a long time as planned, it will not come into play.
When Do Your Heirs Receive Your Refundable Entrance Fee
Check your contract to see when at death refundable entrance fees are indeed refunded. Often times the contract will say the refund happens once your prior unit is under agreement with a new set of residents. This allows the CCRC to take the entrance fee from the new residents and use it to give your heirs your 90% or 80% refund. If the CCRC has many vacancies it may take a while until a new resident occupies your prior unit to trigger the refund.
The article above went over what entrance fees are and how this price can differ depending on what type of facility you decide to live at and if you are moving with a spouse. These fees may be refundable in the future, but it is important to look this over in your contract with the CCRC for clarification. Before choosing a CCRC look over their price sheet. This should go over all the fees associated with living at their facility so you know where your money is going.