While CCRC entrance fees can look daunting or even impossible at first, there are more options available to you than you might think. Different options for payment, varying levels of care packages, and the benefits of living in a CCRC are all factors to consider.
This article will take a closer look at what entrance fees are and how you can afford them, as well as their benefits. Read on to learn everything you need to know about this aspect of senior care.
What are Entrance Fees?
Entrance fees at a CCRC are the fees that you pay before moving in. These fees can change depending on the type of care package you select, along with many other variables.
While they may seem expensive, entrance fees cover a host of care options and extra amenities that can vastly improve your retirement years. It also comes with the assurance that you do not have to worry about constantly relocating as your medical needs change. Your CCRC will be your home for the rest of your life.
Types of Entrance Fees
There are several different types of entrance fees and associated contracts. Depending on the type of contract you sign, your entrance fee may change. These types of contracts are:
- Life care contracts. This is the Cadillac of CCRC options and typically includes most or all assisted living and nursing care you will need in the future.
- Modified fee for service contracts. If you have certain medical conditions that require care or would like to only pay for care that you anticipate needing, you can pick and choose what is covered up front. This is a good balance between life care and fee for service care.
- Fee for service contracts. This is a great budget option, especially if you are not anticipating extensive medical needs or if you have insurance that will cover extended care. Most extended care medical costs are charged at the time of use rather than up front.
In addition, there are also different options for refundable versus non-refundable entrance fees, with the former usually being on a sliding scale as time goes by and services are used. Some facilities offer options for set refund amounts, though that comes with a fee.
Why do CCRCs Have Entrance Fees?
The main reason that CCRCs have entrance fees is to invest in both your care and the facility itself. This means that the bulk of your entrance fee will go toward improving the community and its amenities, as well as any extended medical care you will need in the future. Think of the entrance fee as an investment in your own future.
In addition, the entrance fee often means that the monthly fee is lower. This makes it easier for seniors to afford to live in this type of community.
Am I Buying a Residence With My Entrance Fee?
While the cottage or condo that you will be living in will still be legally owned by the care facility, you are buying the long-term right to live there. A standard house rental lease generally lasts for about a year, give or take, while your CCRC home will be yours for as long as you choose to live there.
Do I Pay a Monthly Fee on Top of an Entrance Fee?
Yes, CCRCs do have a monthly fee. This covers the cost of your condo or cottage, along with the various amenities that your CCRC community offers to you.
Depending on the plan you select before you move in, your monthly fee may also be adjusted based on your medical needs at the time. With a fee for service contract, for example, the monthly amount for assisted living is different from the monthly amount for nursing home care.
How Do People Pay the Entrance Fee?
CCRC entrance fees can look daunting at first. It may be easier to consider what assets you have that you will no longer need after you move in. Residents often use a combination of the following methods to cover the entrance fee for their CCRC of choice:
- Selling a home or opening a home-equity line of credit
- Selling vehicles and other possessions
- Retirement savings
- Liquidating stocks and other financial assets
When you first begin the process of moving into a CCRC, the financial officer on staff can examine your finances and help determine how to pay the entrance fee. They often have many resources at their disposal to help with this process.
Are Entrance Fees Tax-Deductible?
Yes, part of your entrance fee may be tax-deductible! This does depend on what type of plan you are paying for as well as how your CCRC itemizes your payment. Here are the points to remember when figuring out how much of your entrance fee is deductible:
- Only non-refundable portions of your entrance fee can be deducted from your taxes.
- The part of your entrance fee that is marked as a prepaid health care expense is tax-deductible. Residence plans that prepay for your medical care such as life care or modified fee for service plans usually include this, while fee for service plans may not.
- You do not need to be receiving medical care from the facility at the time you deduct your entrance fee because it is considered an advance payment.
- CCRCs have a financial officer on staff who can usually help with determining how much of your entrance fee is tax-deductible.
- On average, about 30-40% of your entrance fee may be deductible.
In addition to your entrance fee, a portion of your monthly payments may also be tax-deductible. This percentage is usually roughly the same as the percentage of your entrance fee that qualifies for a tax deduction.
Final Thoughts
CCRCs may seem daunting at first, especially because of the entrance fee. Understanding the vast resources and amenities that it covers will almost certainly help you understand what an investment it is for both your future and your health.
There are different NH senior living care options available to you in a CCRC, and it's best to understand each level of care and who they are best suited for. If you are on the hunt for a CCRC for a loved one, helping them understand the benefits is the first step to a peaceful transition. All situations are different and CCRC communities are here to make yours as easy as possible.
