Dear M. Miller:
My Dad passed over a year ago. He was living in a Continuing Care Retirement Community (CCRC). He paid a hefty fee when he originally entered, about $350,000. My understanding was that 75% of that would be refunded when he passed. When I first inquired about the refund, the CCRC said they had to refurbish the unit and re-sell it out before the refund was due. That was quite some time ago. Then a few months ago, they filed for bankruptcy. I am completely lost on what to do. Help?
Son Caught in the Legal System
CCRC Definition: A CCRC (also referred to as a Life Plan Community) is understood by most to be a residential community that includes living arrangements for the elderly including independent and assisted living facilities and, sometimes, skilled nursing also. Most CCRCs impose an up front buy in fee that can be quite hefty. For this particular reader, the legal system can be a circuitous ride some times. The first course of action here, is to consult a bankruptcy attorney. Part of the refund you may never get back but, hopefully, most of it you will.
Contemplating a CCRC–The Benefits: For our readers who are contemplating a CCRC, we should probably discuss some pros and cons as a CCRC is not necessarily utopia. Many of my clients who are considering a CCRC are enthralled with the continuing care component and see it as a method to remove the burden of the cost of assisted living/skilled nursing for themselves or their children. This is particularly true if the person does not have sufficient long term care insurance. In addition to that, there is a preliminary study that shows that those living in a CCRC have greater social wellness and are more physically active than similar persons living in the community at large. Further, there is the release from home ownership maintenance.
The Detriments: That’s all well and good but what about the downsides; is the joy a false sense of security? Obviously, all CCRCs are not created equally, some are right for some folks and not for others, and some change over time. But here’s the big kicker: in those CCRCs that have a hefty buy in you are giving up control and freedom. Why? Because if it turns out that after any short trial period (generally a maximum of 90 days) you decide you don’t want to live there, you are probably not going to get your money back, at least not immediately. Some CCRCs refund a percentage of the buy in (there are less and less of these), some refund only after resale, and some simply phase out the refund over a 4-6 year period. Even in the first category, where does the money come from to buy in to another CCRC if it is not received really, really quickly. And in the last two categories, the money may never be available. For those who are not independently wealthy, they probably sold their house to afford the first CCRC; they don’t have a second house to sell to pay for the new CCRC. In other words, the person, i.e.you, could be stuck in a community in which you do not wish to be.
CCRCs–Who Makes the Decisions: And even if the CCRC is delightful when you move in, the CCRC can change over time. Bankruptcies, as in this reader’s situation, are somewhat rare. But sales and changes in ownership do occur more frequently. Remember that in most CCRCs the provider makes all decisions with little to no input from the residents. Although some non-profits are required to have a voting resident on the board, for-profit versions are not. So there can be little meaningful input from residents.
What Can Change? What can change or, put another way, what decisions can the provider make that affect your life and enjoyment? The physical facility can be changed as can management, services, decor, trees, etc. The provider generally makes the decision on whether you are transferred to a higher level of care. (CCRCs are supposed to observe residents’ health status regularly to make this determination.) Maybe you don’t want to be transferred and instead prefer to stay in independent living with a care giver. Although subject to family input, the final decision is generally made by the provider, not you. And if you are moved to a higher level of care, presumably, the provider can sell the unit to a new person and obtain another hefty buy in fee. That is a considerable financial motivation for the provider. Further, monthly fees can go up and generally are raised each year. One study indicated that in 2019, 31% of CCRCs raised at least some of their monthly fees by over 5% and some over 8%. It is true that there are numerous state and federal laws that apply to the skilled nursing facility; however, there is limited oversight from the State of California (several other states exert far greater supervision) as to the Independent Living and Assisted Living sections. So what you liked on day #1 you may be less than pleased with months down the road. To put it bluntly, you are taking an enormous risk!
Protections: There are, of course, various ways to protect yourself before making what is a decision that should not be made lightly. Certainly taking a tour should be on your list. But not just of the independent living operation but also the Assisted Living and Skilled Nursing facilities. Interview some of the present CCRC residents–are they happy, how much input do they have on the governing board? There is a National Continuing Care Resident Association with a $35 annual membership fee. Generally you can find a lot of gripes here which will cause you to get some ideas on questions to ask. Many CCRCs have resident groups that try to make change or be involved in decisions. You may wish to talk to them before you commit. There is an accreditation organization for CCRCs (Commission on Accreditation of Rehabilitaion Facilities). Unfortunately very few California CCRCs are so accredited.
Attorney & CPA-What Can They Do? And, certainly, and maybe most importantly, consult your attorney. The contract needs to be reviewed as well as a number of other documents in order to understand what your rights are in a myriad of situations and what the track record of the facility is. For example, what is and is not covered by monthly fees, what are your rights to a refund, etc. Your attorney will check not only the contract but a number of other sources and will probably involve your CPA to get answers to whether various financial ratios are in line with industry standards.