In our elder law practice, we're often involved in discussions with individuals and couples seeking to leave their homes and move into something more appropriate for their age or medical condition. Some are interested in Continuing Care Retirement Communities — CCRCs. Over the last several years, the number of facilities and the contract options have increased dramatically. CCRCs offer independent living, assisted living, and nursing care under one roof. The idea is that you can get the help you require in the community no matter what your medical condition.
Most, if not all, of these communities require a deposit. Some contracts refund a portion of the deposit if the patient dies or leaves. The deposit amount sometimes depends on the level of care sought. Modern facilities will draw up a contract to get you in the door — whether or not it is good for you ultimately depends on whether you actually need the care.
Some deposits are irrevocable. These are usually associated with "life care" contracts. A life care contract keeps the monthly charges at the same rate no matter where the patient resides in the facility, enabling the resident to predict monthly costs. But deciding who should actually consider life care can be difficult.
The Real Math Behind Life Care
"If someone offered you car insurance with a $100,000 liability payment for $80,000, you would run away. The difference is there's a 1 in 11,000 chance of a car accident — but an 8 out of 10 chance you'll need long-term care."
And this does not even account for the opportunity to qualify for Medical Assistance, which picks up costs for almost 70% of all nursing home patients. Life care is for someone who craves security and peace of mind — even if it is somewhat of an illusion. It may be better for individuals without children or family members who can support them when ill. Remember, 90% of people who need long-term care are cared for by family members in their own home.
If I have a client who wants to pursue life care, I coordinate both their estate plan and the life care contract. I let the facility know we are moving money out of the client's name and into a Family Trust, eliminating the need for probate and costs of administration. We let the life care do its thing and move everything else out of harm's way. There is some freedom in this approach — we focus on administration of assets and elimination of costs and taxes.
My personal preference, however, is to attack the problem directly. Stay at home as long as you can. Get caregivers if need be. If the home becomes a burden, consider a senior living facility or over-55 community. Treat your current needs and plan for your future needs yourself as a type of self-insurance. If you require assisted living, find the best facility available. And if a nursing home becomes necessary, find the best nursing home. Do your homework and make sure your assets are protected. This way, you only pay for what you need — and you have the freedom to go where you want, when you want.
Remember: in a CCRC, you may not even get a vote on when you move between levels of care. Usually a medical committee works with the financial officer to make that decision. Life care — really? Investigate before you buy the blue sky. Work with a competent advisor, learn about the issues, and prepare accordingly.