Understanding Continuing Care Retirement Communities (CCRCs)
In Southwest Florida, Continuing Care Retirement Communities (CCRCs) also known as Life plan communities are very popular. There are many quality CCRCs in this area and because of this, much is needed to increase your understanding about what is a CCRC, and if they are right for you.
These resort-style communities require a significant up-front investment and on-going monthly fee. The basic premise of a CCRC is to allow you to age in place within the community. You move to an independent living residence when you are healthy and active and should your health decline, there is a contractual commitment to provide care and services for you as your needs change. Normally, this care is provided on-site. People select a CCRC since they want the peace of the mind of knowing that they have planned for their future health care needs while enjoying a vibrant lifestyle.
Peace of Mind for your future
People move to CCRCs for the peace the mind of their future. Once all the “what-if” scenarios have been solved, residents are able to enjoy a life filled with friendships, social activities, fitness and cultural programs. Many couples choose to live in a CCRC since they know they are protecting each other should their health change. Lifelong friendships are made since the people living at a CCRC are less transient than other types of senor communities. Since the continuum of care is located either within the main building or on the campus, couples are easily able to be with each other as their needs change. There a feeling of community within a CCRC. Residents can be part of resident council committees (finance, dining, programing, health care, etc.), social groups or sporting activities. Residents also maintain an active life in the greater community as well.
There are CCRCs on large campuses or within single or multiple buildings. Floor plans range from one bedrooms up to spacious three bedrooms. There are even free-standing homes at some CCRCs in the area. Many people elect to personalize their own residences with upscale finishes and appointments similar to what they currently have in their homes.
Better to be 5 years too early rather than 5 minutes too late!
Since CCRCs are obligated to provide care for their residents, CCRCs require a medical and financial assessment for acceptance to the community. Unfortunately, there are times when someone waits for a crisis to occur before deciding and in many cases, they are not accepted to the community of their choice. As I always say, “it’s better to be five years too early rather than five minutes too late.”
Similar to applying for life insurance, the CCRC will require detailed medical information about you. In most cases, a one-one meeting is conducted with the community’s nurse to determine a risk factor. Medical criteria do differ from community to community. Again, the key is to not wait for your health to decline before applying for residency.
A financial application is also required. The CCRC wants to make sure you can sustain yourself financially for many years. The general rule is you should have at least 2 to 3 times in assets of the entrance fee and annual income of the monthly fee. Many communities have a benevolent fund established to help someone should they deplete their assets and can no longer pay the monthly fee.
CCRCs require an upfront entrance fee and an on-going monthly fee. Depending on the specific community, a percentage of the entrance fee could be refundable upon death or when the residency agreement is terminated.
The entrance and monthly fee at a CCRC are based on the residence size and the number of people under the contract. Couples pay an additional amount for the second person. Depending on the community, services and amenities included in the monthly fee vary. Typically, they include meal plan, housekeeping, social programming, transportation and maintenance services.
Office of Insurance Regulation (OIR) Oversight
CCRCs in the State of Florida are strictly regulated by the Office of Insurance Regulation (OIR) through Florida Statute Chapter 651. Within this Statute, there are requirements refund provisions, liquid reserve requirements, financial disclosure, resident rights and reporting guidelines. All residency agreements must be approved by the OIR. The OIR is the consumer watchdog to make sure the CCRC is fulfilling its obligations to its residents. For more information, go to: https://www.flsenate.gov/Laws/Statutes/2018/Chapter651
Types of Residency Agreement
There are different types of residency agreements within CCRCs. The Type A contract is most traditional type. The Type A contract stipulates that should assisted living, memory care or skilled nursing be needed, the monthly fee will remain a constant and not be increased due to the care being provided (ancillary services and products as well as two additional meals will be extra). Normally, the Type A has the strictest medical criteria to move in. The Type B contract either includes assisted living and memory care or provides a discount on care when needed. In the Type C contract, all care-related charges are out of pocket with no discount provided. The Type C has the least medical acceptance criteria to move in.
Refund provisions at the CCRCs vary as well ranging from a 0% refund up to 90 and even a 100% refund. Normally, the higher percentage refund equates to a higher entrance fee. It is important to note that a CCRC contract is not a real estate transaction, therefore you do not have equity in the community. The fees you are paying are paying for care and services over your lifetime.
Because CCRCs are not real estate, there are no HOA dues or assessments, closing costs, or the worry about your estate selling your residence. In most cases, real estate taxes are paid by the community and not individually.
Possible Tax deduction
A portion of the entrance fee and monthly is considered a pre-paid medical expe
nse so the IRS does allow you to deduct this percentage providing you itemize your taxes. The percentage varies from community to community and year to year. Each CCRC should be willing to share with you the percentage so your accountant can plan accordingly.
As mentioned, the continuum of care is main component to a CCRC; therefore, much due diligence needs to occur to understand which health care components are available should care be needed in the future. Not all CCRCs are the same in this regard.
Demographics vary from community to community. There are CCRCs that are not for profit religiously focused and others that are managed locally or through national corporations. Finding a CCRC where you can live with ‘like-minded” people is an important part of the research process.
Senior Housing Solutions
As Senior Housing Advisors, we understand the differences and the complexities of this decision and educate you on which plan best fits your needs. For more information, go to. www.seniorhousingsolutions.net