Understand Entrance Fees with CCRC
Most CCRCs require payment of a one-time fee, usually called the
entrance fee, before moving to the community. The entrance fee
amount often depends on the level of care at the time of entry, type
of housing chosen (with larger units requiring a larger fee), and
agreement type. The entrance fee allows the CCRC to offer lower
monthly fees and provide for future needs of residents. State regulations can impact the terms of the entrance fee and in some states, refunds are called rebates. Entrance fees are typically structured in one of three ways:
*Declining scale refunds*, also known as amortizing entrance fees,
specify a period of time in which the entrance fee will be refundable to the resident on a declining basis. For example, if an entrance fee under this arrangement declines at the rate of 1 percent each month, after 6 months 94 percent of the entrance fee is refundable.
*Partially refundable entrance fees* guarantee a specific percentage of the refund that will be returned within a certain period of time
regardless of the term of residency. For example, 50 percent of the
entrance fee may be refundable upon termination of the contract or
to the estate upon the resident’s death.
*Full refunds* offer just that, a full refund of the entrance fee. A fixed charge may be deducted before the refund is made, and the agreement generally states how long the refund is valid and under what conditions a refund is due. Entrance fees that offer full refunds are typically more expensive than those without refunds or those that are partially refundable or refundable on a declining basis.
Excerpt from Consumer Guide to Understanding Financial Performance and Reporting enhancing PEOPLE’S LIVES in Continuing Care Retirement Communities. The guide is available free of charge at www.carf.org.