Continuing Care Retirement Community Contracts

A continuing care retirement community contract is one of the largest financial commitments most people sign after buying a home, and it is signed when it is hardest to undo. A CCRC contract review asks three questions: what care is promised, what happens to the entrance fee, and whether the operator can keep that promise for decades.

The brochure and the contract are different documents. The residency agreement says who decides when a resident moves to a higher level of care, what it costs, how much of the entrance fee comes back, and when the community can end the relationship. Those terms are negotiable more often than people assume, and our attorneys negotiate them before the fee is paid.

What a Continuing Care Retirement Community Is

A continuing care retirement community, sometimes marketed as a life plan community, combines housing and long-term care under one contract. A resident usually moves in while still independent and reaches higher levels of care on the same campus as needs change: independent living, then assisted living, then skilled nursing. Admission is conditional on both a health standard and a financial standard. New York also requires CCRC residents to carry Medicare Parts A and B plus a supplement policy.

The Main Contract Types

• Extensive or life care (Type A). The monthly fee covers independent living and, when needed, assisted living and skilled nursing, with no fee change because the level of care changed. It costs the most at entry and shifts the most risk to the community.
• Modified (Type B). Independent living plus a defined amount of higher-level care, often a set number of nursing days or a discounted rate. After that, the resident pays market rates.
• Fee-for-service (Type C). Independent living plus access to higher care, paid for separately when needed. Fees are lower, and the risk stays with the resident.
• Rental and equity models. Some communities charge no entrance fee and rent month to month: flexible, but with no locked-in care commitment. Others sell an equity or cooperative interest, which brings resale risk.

Entrance Fees and Refund Structures

The entrance fee is a single large payment made before or at move-in. What happens to it is set entirely by the contract, and one community often offers several options:

• Declining refund. The refundable portion drops each month until it reaches zero. This carries the lowest entrance fee.
• Partial refund. A stated share stays refundable however long the resident stays.
• High-percentage refundable. A large share is refundable, but payment is commonly conditioned on resale or re-occupancy of the unit. The entrance fee is higher to buy this feature.

That condition is where the risk sits. A promise of a high refund “upon re-occupancy” can leave a family waiting through a slow market, a renovation, or a queue of other vacated units. Look for an outside date, a place in line, and the deductions off the top. New Jersey requires a facility with refundable entrance fees to assign each vacated unit a sequential refund number and pay in that order as units resell. Connecticut requires that, for contracts made after October 1, 2015, refunds be delivered within three years of termination.

Death and move-out are treated separately: some contracts treat the fee as fully earned on death, while others refund the estate on the same basis as a withdrawal. In New York, every resident contract must provide some refund during the first four years of residency.

Monthly Fees and How Far They Can Rise

The monthly fee will increase, and the contract rarely caps the increase. What a good contract gives you is process: a stated method for setting the fee, written notice, and a right to be heard. New Jersey and Connecticut each require at least thirty days’ advance written notice of an increase, and Connecticut also requires an explanation and a chance to comment. New York requires at least sixty days’ notice of a change in fees or scope of care. Ask for the five-year fee history and use that trend.

The Operator’s Financial Health

The contract is a lifetime promise from one organization, so underwriting that organization is part of the review. New York, New Jersey, and Connecticut each require a written disclosure statement before the contract is signed, and registration with a state agency. Registration is a filing requirement, not an endorsement.

• New Jersey. The Department of Community Affairs administers the Continuing Care Retirement Community Regulation and Financial Disclosure Act, which requires providers to register and to prepare a disclosure statement covering services, financial condition, and fees.
• New York. The Department of Health certifies these communities and issues the certificate of authority, with a Continuing Care Retirement Community Council in an advisory role. Because the contracts include a health care commitment, the state’s insurance regulator also reviews the residency agreement and reserves.
• Connecticut. Providers register with the Department of Social Services by filing a disclosure statement, financial information, and verification of the required escrow accounts. Connecticut also requires a conspicuous notice warning that the contract is an investment that may be at risk and that the state does not back it.

Rescission, Cancellation, and Dismissal

Rescission is a short window after signing in which a resident can walk away and recover the money, less limited costs. New Jersey and Connecticut each give thirty days, and neither lets the community require a move-in before it closes. New York gives a right to withdraw within the first ninety days on written notice. Cancellation is the ordinary later exit: in New Jersey either side may cancel on at least sixty days’ notice, and a facility may not treat inability to pay as just cause for dismissal until the unearned entrance fee is exhausted.

Dismissal by the community deserves the closest reading: the standard, who decides, and whether the resident can contest it. New Jersey requires just cause, a written determination signed by the medical director and administrator, and a right to a hearing.

Transfers to Higher Care, and Provisions for a Spouse

The transfer clause decides when a resident leaves the apartment for assisted living or skilled nursing, and many contracts give the medical director or a care team the final say. A contract giving the resident or the resident’s health care agent a defined role, an outside opinion, or an appeal is better.

When one spouse moves to a higher level of care, many contracts drop to a single-occupancy fee and add a charge for the second setting, raising the household’s cost sharply. Confirm in writing whether the remaining spouse may stay in the unit, what the second-person fee is, and how the refund works when one resident leaves.

How a CCRC Contract Interacts with Medicaid

Ask first whether the community’s skilled nursing beds are Medicaid certified or private pay only. A community that takes no Medicaid residents may require a resident who exhausts private funds to move off campus, the opposite of what most buyers expect. Read the financial-assistance or benevolence provision too.

The entrance fee itself needs separate analysis. Federal Medicaid law treats such a fee as a resource of the resident where the resident can use it, or the contract allows its use, to pay for care if other resources run short; a refund of any remainder is available on death or on leaving; and the fee confers no ownership interest. Whether a given fee counts turns on the contract’s wording. Paying an entrance fee is a purchase, not a gift, so it is not ordinarily a penalizing transfer. Review a CCRC alongside Medicaid planning and, where care at home is the nearer question, community Medicaid.

How the Entrance Fee Fits Your Estate Plan

A refundable entrance fee is an asset, often a substantial one. In many contracts the refund is payable to the resident’s estate, so it passes under the will and through probate. Some communities let the resident name a beneficiary or direct payment to a trust; that designation should match the rest of the plan. If the refund is large but uncertain in timing, specific dollar bequests and a residuary share can produce a result no one intended. Read the refund terms against the estate plan.

Tax Treatment

Part of what a resident pays may qualify as a deductible medical expense. Under IRS guidance, a taxpayer may include the portion of a life-care or founder’s fee properly allocable to medical care, where the agreement requires that fee as a condition of the home’s promise of lifetime care including medical care. Communities generally issue an annual statement allocating that portion. Confirm the treatment with the resident’s accountant as part of broader tax planning.

What Our CCRC Contract Review Includes

• Review of the residency agreement, disclosure statement, fee schedule, and any addenda or side letters.
• A plain-English summary of what is promised, what each option really costs, and how the refund provision works.
• Review of the operator’s audited financials, reserves, occupancy, and debt, and negotiation on refund conditions, transfer procedure, and spouse provisions.
• Coordination with the client’s financial adviser and accountant, and with elder law planning where long-term care funding is in play.

Admission to assisted living and admission to a nursing home raise different issues: third-party guarantor clauses, arbitration provisions, and discharge and bed-hold rights. We handle those agreements separately.

When a CCRC May Not Be the Right Fit

• The entrance fee is large, illiquid, and concentrated. If it is most of the household’s liquid assets, a later shortfall has few remedies.
• A resident likely to need skilled care soon may be turned down on the health standard, or pay a life care premium for too short a period.
• Someone set on remaining at home may do better funding home care directly.
• A family expecting to leave a defined inheritance should test whether a declining refund contract fits that goal.

Schedule a CCRC Contract Review Consultation

Involve an attorney once you have narrowed the choice to one or two communities, before you sign anything or pay a substantial deposit. Bring the residency agreement, disclosure statement, and fee schedule. Our attorneys practice in New York, New Jersey, and Connecticut.

This page is provided for general informational purposes only and does not constitute legal advice. Laws differ by state and change over time. For advice about your situation, consult a qualified attorney.