Why Consider an Entry Fee Contract

Now that you have decided moving to a continuing care retirement community is in your future, you are probably busy researching and visiting various communities to find the ideal fit.

As you do so, the cost of such a move is obviously a key consideration. Most prospective residents understand the concept of a monthly fee, which typically includes expenses such as utilities, meal plan, housekeeping services and limited medical care.

But many continuing care, or life plan communities, also require an entry fee, which is often a new concept to older adults contemplating such a move. Here’s what you need to know about an entry fee contract.  

Purpose of Entry Fees

Simply put, an entry fee secures for you a spot in the community, lowers your monthly fee, insures that your future health care needs are covered and that you will have a beautiful community to call home for the rest of your life.

“It may seem counterintuitive, but entrance fees can ultimately make senior living communities more affordable—and provide greater predictability,” according to be-group, one of California’s largest nonprofit provider of retirement communities.

Like monthly fees, entry fees can vary greatly among communities across the United States, as well as within a community. At Kendal at Oberlin, for instance, entry fees are based on the type of contract, size of accommodation and single or double occupancy. Entry fees range from $95,000 to nearly $500,000.  The entry fee is not a purchase of property. Instead, you are purchasing services that are designed to last through your lifetime.

As you visit prospective communities, plan to spend time reviewing the various contracts offered. Be sure to ask what each contract costs, both in terms of entry fees and monthly fees, and what services and expenses the contract includes.  

The admissions staff should welcome your questions and be able to provide you with information that is concise. Kendal offers a “cost comparison” worksheet, so prospective residents can compare current living expenses with projected ones under different contracts.

What about Refunds?

Some continuing care communities offer refundable entry fees, but the amount and terms of the refund can vary dramatically.  

Generally, refundable entry fees are considerably higher than nonrefundable entry fees, but guarantee that a portion of the amount paid is returned to the resident or to their estate if they die or move out of the community in a stipulated period of time.

Before you choose a refundable entry fee, here are some things you need to ask:

• Does my home need to be reoccupied before I can receive my refund? It is common practice that entry fee refunds are paid out only after a new resident has signed a contract for that space.  If so, ask if you or your estate will be required to continue paying the monthly service fee until the residence is occupied, or is there a maximum time.
• How can I be sure I'll receive my refund? Historically speaking, entry fee refunds industry-wide have been paid over 99% of the time. The question is usually how soon it will be paid. Find out about if there is a waiting list at the community and typically how long cottages and apartments are vacant.
• What factors, if any, could affect the amount of my refund? Generally, if there are any expenses owed to the retirement community at the time you wish to vacate, that amount will be deducted from your refund before it is paid.

History of Entry Fees

While entry fees may be a new concept to you, the practice has been in existence for many years.

The roots of the continuing care retirement community movement began about a century ago by faith-based and charitable organizations.  Over time, organizations looked for a model that would offer the community financial stability while fulfilling its mission to care for older adults for as long as they lived.

“The entry fee approach evolved in response to this situation. Rather than collecting all the assets of a resident, regardless of the amount, organizations began taking more actuarial approach and established minimum entry fees (combined with monthly fees) that were determined to be adequate to cover commitments to residents,” according to My LifeSite.

Molly Kavanaugh frequently wrote about Kendal at Oberlin for the Cleveland Plain Dealer, where she was a reporter for 16 years.