Unless you’re an attorney practicing contract law, it’s not surprising to find the language and detail of senior living contracts to be a bit confusing and maybe even intimidating. So it’s always a good idea to have your lawyer and financial advisor review and clarify any residency agreement before you sign it. Not only are there several types of senior living contracts, but they can differ significantly depending on a number of variables — whether or not the community you choose offers a continuum of care, where it’s located geographically, the number of people who’ll occupy your residence, and other factors. The type of contract you choose will affect the levels of care to which you have access, how much you pay for these services, and your senior living costs overall. Here’s an overview of the general payment structure for most Life Plan Communities (also called continuing care retirement communities) and the various contracts they offer.
What your CCRC contract provides.
Life Plan Communities (CCRCs) require an entrance fee and an ongoing monthly fee. For these, they offer a combination of Independent Living and short- and long-term care services such as Assisted Living, Skilled Nursing and Rehab, and Memory Care, typically all on one campus. In addition to housing, they provide a variety of services and amenities like meals, housekeeping and transportation while focusing on independent, healthy living with built-in support programs, wellness options, entertainment and so on. This level of comfort and support lets residents age in place, knowing if their care needs change over time, they’ll be addressed effectively without having to move to a different community. But before you sign a residency agreement for these services, you’ll need a working knowledge of what those contracts mean and how they differ from one another.
The five main senior living contracts.
The Type A Life Care Contract requires a one-time entrance fee and a predictable monthly fee. If a resident needs to move from Independent Living to Assisted Living or Skilled Nursing, the monthly fee generally remains the same, other than the cost of additional meals and special supplies that might be needed for care. This means the rate is essentially the same regardless of whether a resident is living independently or needs additional care.
You might think of it as prepaying for care you could need one day. An advantage of choosing this contract is that you’ll likely save money if you ever do need care. Waiting to pay for services when you need them later will cost more than they would with the preferred rate of a Life Care contract. Type A contracts give you whatever level of care you need for as long as you need it. They’re ideal for those who want the peace of mind that comes with a single, set monthly fee, and the knowledge that all their care needs will be covered for their lifetime.
Another version of the Life Care contract is known as “equalized pricing.” In this version, when a resident transfers to a higher level of care like Assisted Living or Skilled Nursing, they begin paying a predetermined amount equal to the pricing for a specific residential unit named by the community. This means that a resident who was in a lower-priced residence would pay more for Assisted Living or Skilled Nursing care services, but someone who was in a higher-priced residence would pay less.
The Type B Modified Contract also provides living accommodations, dining options, access to campus services and amenities, transportation, and medical services. But unlike Type A Life Care, Assisted Living, Memory Care and Skilled Nursing may not be fully covered by the monthly fee. Residents will have access to a pre-defined number of days in the health care center either at no cost or at a discounted rate. But if you need care for longer than that, you’ll pay extra. Most Type B contracts do offer a rate that’s discounted relative to market rates, but choosing this contract means accepting more financial risk in the form of higher monthly fees than with Type A contracts. Type B contracts generally require a lower entrance fee and are best for those who don’t expect their care needs to increase significantly over time.
The Type C Fee-for-Service Contract often offers the lowest entrance fee and lets residents enjoy the same services and amenities available to those who’ve chosen a Type A or Type B contract. But if higher levels of care are needed, the monthly fee will increase to equal current market rates. Some Type C contracts will cover emergency care, but none cover long-term care or Skilled Nursing. Anyone choosing a Type C contract must be able to assume the full financial risk of their future health care costs.
The Equity/Co-Op Contract lets a resident purchase their residence instead of paying an entrance fee. You’ll still pay a monthly service fee or home association fee, as well as any home maintenance expenses needed. Some CCRCs operate under the co-op model whereby residents purchase shares of the corporation. Under both arrangements, health care services are usually offered at full market rates. If you choose an equity contract, be sure to understand the nuances of the agreement. In some cases, if you own the residence outright, it will eventually pass on to your estate. But the monthly service fee may continue until your heirs resell the residence to someone who qualifies based on age, finances and health. Other terms may dictate that if you leave the community or pass away, the operator still owns and resells the residence. You or your heirs may receive some predetermined portion of any price appreciation. It’s best to consult your lawyer and financial advisor before signing an equity contract.
Rental CCRC contracts often let you rent month to month, requiring no large, upfront entrance fee aside from perhaps a smaller “community fee.” The monthly fee, however, will likely be higher on a rental contract than what a typical entrance fee community would charge. You might not be given priority access to care services, meaning there might not be a space for you in the health care center when you need one. Rental residents also pay full market rate for care services. Thus, residents in a rental CCRC — particularly couples — could pay more over their lifetime than they would in an entrance fee community.
Do your homework. Get help from professionals.
CCRC contracts can be complex. Ask as many questions as you can to learn about the different types of contracts offered by the communities you’re considering. Be sure you understand how each will affect your care and finances in the future. Understand which services are included and which are not. Learn what else is covered beyond care services — what types of wellness and preventive care services. Understand how the community charges for specialized programming and activities. Find out how refunds work prior to signing a CCRC contract. Most importantly, enlist the aid of your attorney and financial advisor.
Find financial options at Friendship Village
As a community offering the Life Care contract, Friendship Village provides pricing and value that’s unique in St. Louis. We also offer incentives and financial options that make living at Friendship Village affordable. Entrance fees begin at just $80,000, and we have refundable options. Life Care lets you enjoy lifetime, unlimited access to on-site Assisted Living and Skilled Nursing, and could also provide tax-deductible benefits. We invite you to meet with a Friendship Village senior living specialist to learn more. Just contact us to start the conversation.