Continuing Care Retirement Communities: Helping Clients Choose
With a rapidly aging population, more people will turn to their CPA in the coming years as a trusted source of guidance, especially when making senior living decisions. A popular, but also rather complex choice is the continuing care retirement community (CCRC or “life plan community”).
By combining independent living with a continuum of care, CCRCs offer a viable solution for older adults who are healthy today but seek the peace of mind of having care services readily available in the future. Your client’s specific needs will likely determine which CCRC is best for them. There is no “one size fits all” approach here. Yet, due to the financially significant nature of the CCRC decision, it is important to make sure their first choice is the right choice, so you owe it to them to be well-educated and informed on this topic.
In its truest form a CCRC provides lifetime housing and priority access to care services, including assisted living, memory care, and/or skilled nursing. However, the contract language can vary significantly from one CCRC to another, particularly as it relates to pricing.
Most CCRCs require an entry fee in addition to monthly fees, which help fund the breadth of services offered, including healthcare. With entry fees, almost all are refundable in some capacity. With declining-balance models, some portion of the entry fee will be available if your client moves out, or passes away, during the first few months or years. The amount refundable declines each month until no refund remains. Under return-of-capital models, your client will pay a higher entry fee but will get some portion of the entry fee back, no matter how long they live in the community.
Refunds typically range from 50 - 90%. The difference between what your clients will pay while living independently versus what they will pay when they need care depends on the type of contract. Some contracts, known as lifecare, stipulate that the monthly fee will remain level, except for inflationary increases, regardless of how much care is received. Other contracts, typically referred to as fee-for-service, require lower monthly fees while living independently, but, when needed, care services will be billed at the market rate, which may amount to an increase of several thousand dollars per month. There are also contracts that represent a hybrid of these two choices.
While it is important to review the entire contract, a few other details you’ll want to pay careful attention to are: the potential additional costs beyond the published rates, stipulations for receiving refundable portions of the entry fee (when applicable), and what happens if your client exhausts their assets on healthcare.
Financial Stability of CCRC
The financial stability of a CCRC will, in large part, determine whether it can fulfill its long-term commitment to residents. Being well-versed in senior living can help you help your clients analyze a CCRC’s financial ratios relating to reserves, profitability, and debt. A few other things to consider are whether occupancy is at or above 90 percent, if an experienced management team with up-to-date marketing and strategic plans runs the facility, and if a recent actuarial study has been performed by an independent actuary.
Location, culture, programs and other services and amenities should align with your client’s personal preferences. Ultimately, it’s most important to consider whether the lifestyle offered will help your client thrive in mind, body and spirit.
It may be wise for your client to stay a night or two in a guest suite to get a sense of what it might be like to live there. They can observe whether residents seem involved in the community and respected by staff. Are activities mainly resident-driven or staff-driven? This can indicate the vitality of the resident base, or lack thereof. Is there up-to-date technology, including wi-fi in common areas and in the residences? Also, are meals only available at scheduled times, or are there flexible meal times and menus? Answering these questions will help your clients identify the best fit.
Since the availability of healthcare services is one of the main reasons for choosing a CCRC, your clients should do the proper due diligence to be sure high-quality care is provided. For CCRCs with a Medicare-Certified healthcare center, the first place to start is to look up their CMS rating on the Medicare website under “Nursing Home Compare.” This includes things such as quality measures, safety inspection outcomes, staff ratios and more. Other steps include asking whether the healthcare facility has received any special awards or recognitions recently, and checking with the regional long term care ombudsman to find out if there is a record of complaints.
As a CPA, you will continue to be a resource to your clients as they age. It is important to help them carefully weigh and think through the critical and life-changing process of selecting a CCRC. It is a complex and potentially confusing decision to make, and helping them through this time will demonstrate your incalculable value. For more information on helping clients with elder planning and elder issues, visit the AICPA PFP section Elder Planning resource page.
Brad Breeding, CFP®, president and co-founder of MyLifeSite.net, an online senior living research and forecasting tool. He is a nationally recognized expert speaker on retirement planning and the senior living industry. Brad previously spent 14 years as a personal financial adviser, focusing on sound planning for retirees. He has authored several books on issues related to senior living, including his most recent, “What’s the Deal with Retirement Communities?,” available Spring 2017 on Amazon.com.
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