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CCRC Contractual Pitfalls
Jan L. Warner & Jan Collins

Question: My parents worked all their lives to put me and my siblings through school so that we would have better lives. Dad worked for the government and, after he retired the first time, he took another job and did not totally retire until he was 72. Mom always stayed at home.

Since they were always very private and conservative with their finances, we were surprised when they told us they were selling their home and moving into a church-sponsored senior community. There, according to Mom and Dad, they would be able to get care for the rest of their lives, even if they ran out of money. While it sounded too good to be true, we knew better than to question their judgment.

When Dad died last year, our sister who lived closest to our folks was named executor of his will and served as Mom’s power of attorney because Mom had reached mid-stage dementia and needed help with just about everything. It was then that we got our first dose of reality: Mom would have to leave her senior community home of more than six years because she did not have enough money left to pay for her care

No one seemed to know about the “perpetual care” Mom and Dad were so sure they had bought. At a family meeting, we reviewed their finances for the first time and learned that in addition to a $200,000 nonrefundable deposit, their monthly fees had increased from just under $2,000 to more than $6,000 in six years. Today our mother has a total income of $975 monthly, just over $10,000 in the bank, and is healthy as a horse, physically. Since the nursing center doesn’t accept Medicaid, we have to start over. Since we don’t think there is anything we can do, we hope that you will print this letter so your readers will know that seniors are getting rooked every day. It’s best not to be too proud to seek help from children who care.

Answer: As your family has learned the hard way, “life care” or “continuing care” contracts – where folks pay a big price of admission and escalating monthly payments for “lifetime” lodging and nursing home care – can be problematical and should be reviewed in detail before signing in order to protect the interests of the resident.

Through a contractual relationship with a continuing-care retirement community (CCRC), a resident receives levels of care within the same community according to health conditions. As health declines, the resident moves from one level to the next while still maintaining lines of communication with spouse and friends. Depending on the resident’s needs, these care levels extend from independent living in a home, apartment, or studio to assisted living to nursing care.

The CCRC will charge both large entrance fees (some of which may be refundable at the resident’s death, depending on the length of the resident’s stay prior to death) and monthly fees that may increase based on formulas set forth in the contract.

Generally speaking, the cost of lodging and care in these communities is comparatively high and unaffordable to seniors who are not affluent. Those seniors with lower or mid-range income and assets, such as your folks, tend to move in too early and run out of money just when they need the most expensive levels of care -- assisted living and nursing home.

The types of contracts are almost limitless. Some provide for unlimited nursing home care without significant increases in the monthly fee, while others guarantee a certain period of skilled care after which the resident totes the freight. Still others require payments for every level of care.

While CCRCs offers an appealing alternative to some senior citizens, they are not for everyone. Next Week: More about negotiating the dangers of the CCRC.

Need more advice or help with this topic? Click here to get information about taking the "Next Step".
     Related Resources

  • A Roadmap To Help You Choose The Best Nursing Home Facility For Your Elderly Family Member: What To Ask and What To Expect

  • Always Make Sure You Understand CCRC Contracts Before You Sign.

  • Contracts For Continuing Care Communities are Tricky and One-Sided

  • Continuing Care Neighborhoods Need Careful Examination

  • CCRC Contracts Part 2

  • Create your personal health plan now and make your wishes known ® using My Final Decisions

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