Investing in a continuing care community requires a substantial monetary commitment. Therefore, you might want to have a trusted financial advisor examine your personal financial situation to make sure you can afford the facility for the long-term.

Likewise the community, in order to deliver contracted services over a long period of time, must be financially sound. It is a good idea to ask to review copies of the CCRCs past financial statements and to have a certified public accountant review them to gauge the financial health of the community. The community should, upon request, make available a copy of its most recent audited financial statements. Some CCRCs in other states have had significant financial problems that have created hardship among their residents. The risks involved for both the consumer and the provider need to be explored.

Contracts

Massachusetts law 1 requires CCRCs to disclose in writing certain information to prospective residents before the contract is signed or any money is given to the CCRC. The information that must be disclosed includes: the name and business address of the provider, type of legal entity, names of officers, directors and partners, a description of the business experience, name of managing organization, affiliation with religious, charitable or non-profit organizations, certified financial statements of the provider, and if not yet built, construction and financing information.

The same law also requires that all contracts for CCRCs include the following provisions/information 2:

  1. The prospective resident may cancel the contract any time before moving to the community. Depending upon the terms of the contract, the buyer may be eligible for a refund of most of the fees paid;
  2. The prospective resident may rescind the contract if the unit is not available to move into on the date agreed. Again, depending upon the contract, the resident may receive a refund;
  3. Whenever a resident leaves the community or dies, he or she has a right to a refund of the entrance fee, minus one percent for each month of occupancy;
  4. A list all services or medical care covered by the basic agreement as well as all those which are available at an extra charge; explanation of all other fees; and rate adjustment procedures;
  5. Explain the health and financial conditions required of residents to be accepted; and
  6. Information about the how the community will be able to financially fulfill its contractual obligations.

Most CCRCs are required to file a disclosure statement that includes a copy of their contract and advertising materials with Elder Affairs. The public can review this information at Elder Affairs office at 1 Ashburton Place, 5th Floor, Boston, Massachusetts.

Again, it is recommended that you have an attorney review the terms, conditions, and requirements of a CCRC contract before you sign it.

Entrance Fees/"Buy-in" Options

In addition to the monthly service fees, many CCRCs require a one-time entrance fee. Entrance fees vary from one community to another depending on the type of housing and services and the extent of health care that is provided.

All CCRCs are required to have a "declining-refundable" entrance fee, which means when a resident leaves the community, they or their estate, will receive a refund of a portion of the entrance fee after subtracting no more than 1% for every month the resident lived at the community.

Some communities offer a cap on the declining-refundable entrance fee that limits the amount by which the community can reduce the initial entrance fee. This guarantees that the resident will receive a refund of at least a specified percentage of the initial entrance deposit, regardless of how long that person lived in the community. For example, if a resident lived at the CCRC for 15 years, the community could deduct 1% of the entrance fee every month for the whole 15 years (i.e., subtract 1% each month for 180 months). However, if the declining-refundable entrance fee was capped such that residents would receive no less than 90% of the initial entrance fee upon departure from the CCRC, the resident and/or his/her estate would receive the initial entrance fee minus only 10%. Therefore, the longer a resident anticipates remaining at a CCRC, the more advantageous a capped fee deduction is.

At some CCRCs, residents become members of a real estate cooperative, owning a small percentage of the entire community rather then an individual unit. At others, residents have the option of renting a unit rather than purchasing one outright. An attorney and/or financial planner should be consulted in order to understand the benefits/disadvantages of these different options.

Issues to consider regarding Financial Considerations

[1] M.G.L. c. 93, s. 76 and Chapter 230 of the Acts of 1996 both pertain to CCRCs.
[2] This list is not complete. A lawyer should be contacted for more information.