Question: With none of our children located anywhere near us, my wife and I have come to the realization that, although not ill and not really old at 74, we should sell our home and settle in at an adult community. We have read that some communities specialize in providing for increasing care needs – from an independent apartment or residence to assisted living to nursing home care, when needed. We are also interested socializing with others our own age, and many of our friends have moved from our neighborhood. While we hope that we will not need a nursing home and don’t want to be morbid, we feel we need to be realistic.

We visited a community that seems ideal and were told that if we buy in, we would receive progressive care for as long as both of us live. When the admissions director began explaining the economics of the transaction, we got nervous. We feel we must have an unbiased opinion about how this move will impact us economically. Our lawyer had never heard of this kind of arrangement. Can you guide us to where we can find information about these types of care contracts and whether this is a sensible alternative for people like us?

Answer: While a growing number of communities promote progressive levels of care and “aging in place”, there are economic considerations and potential pitfalls that should be investigated before signing on the dotted line.

Basically, “continuing care” arrangements provide you and your spouse with residential quarters, meals, and other services and -- if and when necessary – assisted living and nursing home care during your joint lives. In return, you can expect to pay a substantial admission fee and continuing monthly payments that can – and most probably will – fluctuate upwards. Because these arrangements can continue for many years or terminate should both of you die unexpectedly, critical financing issues must be examined, especially when the net worth of many seniors has been decimated of late.

In some instances, the admission fee is not refundable at death -- no matter how long you have lived there and no matter the value of the services you actually received. And if you and your wife are not purchasing “ownership rights”, you should determine exactly what you will receive for your money. On the other hand, some facilities sell you an interest in a cooperative that you are required to sell at a predetermined price if you enter the nursing home area of the community or die.

While there are advantages -- independent living, security, and affordable nursing home care if and when you need it, there can be significant financial disadvantages. For example, if the owner of the community is not financially sound, you may experience substandard conditions and less quality of care due to cutbacks in staffing and services. And since admission rates are based on the projected deaths of residents, longer life can lead to the owner’s financial instability. Should the community go bankrupt, you would stand to lose what you have “invested” in the right to live in the community. And should the community be sold, you may be faced with different treatment from new owners. Due to the influx of large amounts of cash from admission fees, some communities have “gone under” when management did not budget appropriately.