Closing Thoughts by Jim Young
Sponsored by Andrews & Young, PC
Friday, August 22, 2014
HOME SOURCE www.theday.com/realestate
For some of us a time comes when we do not want to—or are unable to—continue to live in our homes. We need to move to a new home where we can “age in place,” as the saying now goes.
This can be a trying time. Options vary greatly depending on one’s financial and family circumstances and on how much support is needed.
I think back to my grandmothers. My father’s mother came from County Cork in Ireland. My mother’s mother from Patterson, New Jersey, after marrying my grandfather, who also came from Ireland. They each had many children and survived their husbands, both of whom died before I was born.
My grandmothers died in their eighties, when I was young, and my memories of them are limited. My father’s mother lived at home until her death with one of her sons, who was a lifelong bachelor. I remember going to her home after Sunday Mass in our good clothes for weekly dinner. It was uncomfortable being in an old house filled with old things and with little to occupy me (though there was a chicken coop in the back yard).
I arrived very late in her life and she doted on me, pressing a quarter into my hand as she placed a moist kiss on my cheek, despite my squirming resistance. And there was her glass eye, too. The highlight of the day would come when my cousin Jack would sing the old Irish songs for us. I think he must have learned them from my grandmother.
My mother’s mother in her elder years circulated among the houses of her many daughters, spending some months at each home until she would move onto the next one.
My many aunts and uncles, with one exception, lived nearby their old family homes and remained an active part of the lives of their parents and siblings.
So many things have changed over the years, some for the better and some for the worse. But for many reasons, I think it is becoming less and less common for seniors to live the final years of their lives in the way my grandmothers did.
One option available today is to move to a facility that offers independent living, assisted living, and skilled nursing options. I recently had the opportunity to work with a family where the patriarch moved into a continuing care retirement center, or “CCRC,” and I found the complexity of that arrangement to be daunting.
To quote from an article dated Sept. 30, 2010, written by the Office of Legislative Research for the Connecticut Legislature, “CCRCs are retirement communities that provide, generally under ‘life care’ contracts, independent living units and a continuum of long-term care services to elderly people, allowing them to ‘age in place.’ They generally require a very large upfront payment from residents when they enter into the contracts, along with a monthly maintenance fee.”
The types of services provided for this monthly maintenance fee can vary considerably based on options chosen by the prospective resident when entering the facility. Generally, the higher the monthly fee option chosen on entering, the more services will be provided in times of greater need without an increase in cost.
The arrangement offered by the CCRC I reviewed involved the resident paying a substantial entrance fee—most of it designated as a “loan” but one that bore no interest—for the right to occupy a unit and pay a monthly fee for services. All such loans made by residents were to be secured by a mortgage on the CCRC property, however one that was junior and inferior to other mortgages the CCRC might grant on the property. In the event the resident wanted to leave the facility, the resident would receive back a portion of the entrance fee/loan, decreasing for each month of residency.
The “refund” of the loan would be made 18 months after the resident’s departure or when a new entrant to the facility wanted to buy the license to occupy the unit occupied by the resident, whichever came first. As a practical matter this indefinite delay in return of the entrance fee/loan could materially hamper the ability of a resident to move out of the facility.
I understand the policies of CCRCs on this issue are not uniform. Connecticut law requires that the operators of these facilities, some being for profit and some nonprofit, give prospective residents disclosures about certain relevant facts regarding the arrangement. The documents I saw ran to well over 100 pages in total and read much like a disclosure for a mutual fund or investment governed by the SEC. To me, they seemed ill-designed to give consumers plain language information about some of the most important things.
My understanding is that prospective residents are encouraged, but not required, to have the arrangement reviewed by an attorney or financial advisor before loaning the facility hundreds of thousands of dollars. My sense is that prospective residents may see a move into such facilities as “their last move” and for that reason may not give as much scrutiny to the instruments as is appropriate for a complicated transaction of this nature.
I note there is a Connecticut Continuing Care Advisory Committee, members of which are appointed by the Commissioner of the Department of Social Services. I was interested to see that at a recent meeting, the president of the Connecticut Continuing Care Residents Association (ConnCCRA) submitted a formal letter outlining areas of concern as follows: that debt incurred by any CCRC be incurred solely to benefit the CCRC in question; that residents be allowed to participate meaningfully in budgetary decisions that impact increases in monthly service fees; that all such fees be used exclusively for the CCRC that generate them; and that owners of CCRCs be required to notify residents in advance of any contemplated increases in the debt that the CCRC carries.
No doubt entering a well-run and solvent CCRC can be a good decision for those with the means to afford such a move. That said, the arrangement between the facility and its residents strikes me as unique, complicated, and likely of a sort that the consumer has not encountered before. Therefore, in considering buying into a CCRC, the consumer may be at a substantial disadvantage in knowing what to look for and what to ask about.
The relationship between the facility and potential resident is, at least at the start, that of a seller to a buyer; and in my experience, sellers want to sell their products. Buyer beware, as the old saying goes.
When considering such a move into a CCRC, the consumer may be in a living situation they cannot maintain. It may be in a time of high emotion, and they may be feeling some pressure to make a decision. Any person considering a move into such a facility would be well advised to take their time, proceed with caution, educate themselves about how CCRCs operate in general, and learn the particular details of any specific CCRC they are considering.
Speaking to other residents, and to the members and leaders of the CCRC resident association, could provide useful insights. Ask the hard questions and demand clear answers. Retain advisors to counsel you who will help you understand what you are doing, and make a decision that is best for you.