What is a CCRC and How Does it Work? Part 2: Paying for a CCRC

In this three-part blog series, attorney Kelly Shovelin of Four Pillars Law Firm discusses Continuing Care Retirement Communities (CCRCs): What are CCRCs?  How do they work? How do you choose the right CCRC for your needs?

Learn the answers to these questions and more as she covers Understanding CCRCsPaying for a CCRC, and Choosing a CCRC.

In the second part, Kelly discusses Continuing Care Retirement Communities (CCRCs): Paying for a CCRC.

Paying for a CCRC

Often, the perceived downside of CCRCs is the cost, which can be greater than what people with low or moderate income and assets can afford.

Prices depend on the amount of care provided, the type of contract, and the unit’s size and geographic location.  When required, entrance fees may run from $20,000 to more than $500,000.  Additionally, monthly charges at a CCRC may range from $200 to $3,500.  Often, seniors use the proceeds from the sale of their home to make the initial investment in the retirement community. However, the Internal Revenue Service does not allow home sellers to roll over their capital gains into the purchase of a CCRC unit.  Consequently, a tax may be due on gains from the sale of a home even though a CCRC unit is being purchased with the proceeds.

CCRC residents may be entitled to a refund of their entry fees on a declining scale if the refund is requested within a short time after moving in. Generally, refunds are no longer available after a specified period of residency in the community. Some CCRCs give residents the option of paying a higher entrance fee, which remains refundable. In these cases, part of the entrance fee will be refunded to either the resident when the resident moves or the resident’s estate upon the resident’s death.

The number of payment options is growing. Although the entry and monthly fee arrangement is the most common, some CCRCs offer rental or equity arrangements. Under a rental arrangement, residents pay only a monthly fee, which typically covers housing and designated services (sometimes including health care services). Under equity arrangements, residents purchase their residence as they would purchase a cooperative apartment or condominium, although the resale of the unit is usually limited to those who meet the community’s eligibility criteria. Residents may then purchase service and health care packages for an additional fee.

CCRCs usually have the following three basic fee schedules:

  1. Extensive contracts, which include unlimited long term nursing care at little or no increase in the monthly fee. This arrangement requires residents to pay a higher initial fee.
  2. Modified contracts, which include a specified duration of long term nursing care, beyond which fees rise as care increases.
  3. Fee-for-service contracts, in which residents pay a reduced monthly fee but pay full daily rates for long term nursing care.

Contracts have become more confusing over the years, with many CCRCs offering different variations within each fee schedule. For example, a CCRC might offer two different extensive contracts and one modified contract, with different refund levels for each contract. Click here to visit the CCRC Data website, where you can find a directory of CCRCs and sort them by location, price, long term health coverage, and refund plans.  If you are evaluating a CCRC and its associated contract, it may be beneficial for you to seek the counseling of an attorney to ensure you understand fully the terms of the contract.

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