The A’s, B’s, C’s and D’s of Life Plan Communities
LongTermCare.gov reported that two-thirds of older adults ages 65+ today are likely to need long-term care support in their future, with 20% of those needing it for five years or so.
Life Plan Communities are also known as Continuing Care Retirement Communities (CCRCs). They are senior living communities that provide an active and vibrant independent lifestyle. Should your needs change, additional healthcare services such as Assisted Living, Rehabilitation and long-term Skilled Care are available.
Life Plan Communities typically offer one or more of the following types of contracts from which you can select.
Understanding Life Plan Community Contracts
Type A Contract: This is also called an Extensive or Full Life Care Contract and is recognized for being the most comprehensive. It provides the greatest sense of financial security due to the prepayment of healthcare through the fee structure.
- Fees
With a Type A Contract, you will pay a large initial entrance fee. A monthly service fee pays for meals, maintenance and housekeeping, utilities, access to amenities and more.
- Benefits
You will have unlimited access to additional care that may be required in the future, provided within the same community and at a predictable rate.
A Type A Contract typically provides a refund of the entrance fee paid once a resident is no longer living at the community, though it can vary by community, with 0% to up to 90% being refundable. The speed of the refund also varies from community to community.
A person in Independent Living with a Type A Contract will usually pay more than those with other contract types, because of the entry fee and monthly service fees. The trade-off is that moving forward, all services, including those that are health-related, will be provided at lower than market rates with only slight increases adjusted for inflation.
Furthermore, residents with a Type A Contract typically receive tax benefits related to the prepayment of future healthcare costs.
Type B Contract: This is also known as a Modified Contract. The Type B Contract enables residents to save money initially, but with limited financial protection for future healthcare needs.
- Fees
Typically, the entrance and monthly service fees are lower than in a Type A Contract, thus saving money at the start. However, if a higher level of care is needed, the market rate will be discounted but only for a limited number of days (i.e., 60-90). Services required thereafter will be at market rate, thus increasing expenses for the care being offered.
- Benefits
The benefit of lower healthcare expenses through a Type B Contract is only temporary. There may be tax benefits, but these are lower than those with a Type A Contract. When the resident is no longer living at the community, there is typically a refund of some guaranteed percentage of the entrance fee, and this will vary by community.
Type C Contract: This Fee-for-Service Contract features a lower entrance fee and monthly fees but requires residents to pay prevailing market rates for healthcare services if and when they need them.
This and the Type D Contract below are the least expensive at the start of residency, offering much greater flexibility for the resident, but they are also considered the riskiest in terms of healthcare costs.
Type D Contract: Rental agreements are month-to-month with no long-term commitment.
- Fees
The communities offering this option do not require a substantial entrance fee, but a much smaller fee known as a community fee. The monthly service fee is typically higher than that of other types of contracts, and residents are responsible for paying all healthcare costs at full price. The tradeoff is that it is much easier for the residents or their families to end an agreement with little to no outstanding obligation.
Equity or Co-Op: Through this agreement, residents have ownership of their home and pay monthly service fees for amenities and services, similar to those of a homeowners’ association. The property can be sold at the conclusion of your residency. Healthcare is provided out of pocket and/or through long-term care insurance.
Lifesite.net recommends you do your homework to understand and compare contracts and communities in order to best understand your options.
Choosing the Right Life Plan Community for You
Understanding Life Plan Community contracts is the first step toward confident planning for your future.
At Pisgah Valley Retirement Community, we’re here to help you understand our Life Plan Community contracts and all the finer details.
Request a brochure today to learn more about life at Pisgah Valley.