Senior Living Contracts 101
While many retirement communities offer an enhanced lifestyle and security for the future, senior living contracts can leave a lot of older adults confused about which is right for them. To help seniors make a smart plan for their future, we’ve outlined the differences among some of the most common senior living contracts.
Senior Living Rental Contracts
Senior living rental communities offer residents a maintenance-free lifestyle with added services and amenities. A rental contract is principally a standard lease, but the exact terms will vary depending on the community. Residents will likely pay a security deposit or community fee as well as monthly fees. Rental communities can be great for residents who are still independent, but if or when those residents need higher levels of senior care, they most likely will have to move to a community that accommodates them.
Life Plan Communities
Also known as a continuing care retirement community (CCRC), a Life Plan Community is a senior living option that offers independent senior living as well as escalating levels of care, often on one campus. A Life Plan Community is an ideal option for seniors who only want to move once, instead of moving to a new community whenever their needs change. They’ll know they have a smart plan in place and will remain in a familiar environment, even if their health changes.
What is an entrance payment?
An entrance payment is an initial fee paid to secure a place in the community. The exact amount of an entrance payment depends on a number of factors, including the size of the residence, the number of occupants and the type of contract. Nonrefundable entrance fees carry a smaller price tag, but they generally don’t return money to a senior or their family in the event of a move or death, or if the senior has lived at the community for a certain time period (the time frame varies by community). Refundable entrance fees are higher in cost, but some percentage of the fee can be returned upon a senior moving or passing away. Refundable plans make sure there’s something left for the resident’s family/heirs.
What do monthly fees cover?
This answer will vary for each community. For the most part, monthly fees will include access to campus amenities, your dining plan, as well as services like housekeeping, maintenance and community programs.
Life Care Contracts (aka Type A Contracts)
Life Care contracts offer the most comprehensive plan for the future. Under this senior living contract, residents can easily transition to higher levels of care with little or no increase to their monthly fee. This contract often ensures residents pay lower than market rates for health services, providing substantial savings over the life of the contract.
A Return-of-Capital Life Care contract typically requires a larger entrance payment, but it offers more financial security by returning a portion back to you or your estate. The amount returned will differ but may be as high as 90% of the entrance payment.
A traditional Life Care contract requires a lower entrance payment than a Return-of-Capital contract, but the entrance payment will amortize over time.
Type B, Modified Plan Contracts (aka Type B Contracts, Modified Agreement or Modified CCRC)
Modified Plan contracts typically command a lower entrance fee and/or monthly fee than a Life Care contract. All services and amenities are often included, but if the resident needs higher levels of care, like assisted living, memory care or skilled nursing care, the community will only offer a certain number of complimentary days at the health center, and/or the community will offer access to the health center at a discounted rate. Under a Modified Plan contract, your monthly service fee will be affected by the level of care you receive.
Fee-for-Service Contracts (aka Type C Contracts)
Fee-for-Service contracts require seniors to only pay for health care when they need it. Entrance payments and monthly fees are typically lower than a Type A or Type B contract, but if or when the resident needs care, they will likely pay full market rates. Independent living residents who need short-term care will have to continue to pay the monthly fee for their residence as well as the price of short-term housing and the health services they receive.
Life Plan Community Rental Contracts
A rental contract can be offered either at a CCRC/Life Plan Community as an alternative to the entrance fee financial plans, or at a stand-alone rental retirement community that typically offers few, if any, levels of care above independent living. (Some rental communities do offer higher levels of care, but it’s not that common.) A rental senior living community — just as the name implies — relies on a short-term agreement between the renter and the community itself. It’s often paid month to month, much like a traditional apartment lease. Unlike at a Life Plan Community, residents aren’t paying anything toward higher levels of care they may not want or need, and will likely have to pay full market rates if they require health services in the future.
If you’re interested in learning more about Life Plan Communities in Long Island, New York, our team at Jefferson’s Ferry would be happy to answer your questions. We offer a variety of senior living contract options to suit your needs and preferences, and if you need help selecting a contract, our helpful team members can help. You’re more than welcome to reach out to us.