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Senior Living

2001-09-01 11:30:00

What are our options?

Question:  My parents are in their mid 80s. Their house is valued at over $150,000. They have no mortgage. Although they continue to take care of each other, we know the time is quickly approaching where this will not be the case. They do not have any long-term care insurance and probably could not qualify now for a policy. We have discussed them selling their home and taking the proceeds to move into an independent living situation where help would be available as they need it. The problem is, other than their home, their assets are less than $50,000. Their combined income is a little over $2,000 per month. They are afraid they will run out of money. Some time back I remember hearing about a program that allowed a couple to trade their home for guaranteed independent living and nursing care (if needed) for the rest of their lives. Can you tell me about it? If the program no longer exists, what would be your recommendations?

Answer:  To the credit of you and your parents, you are engaging in an important discussion. One we often want to avoid. It's sometimes difficult for us to admit our parents are reaching this stage of life and it is often difficult for them to recognize that they may need to look at their options for retirement living and health care.My first recommendation would be to investigate the continuing care retirement communities (CCRCs) in the area your parents wish to live.  CCRCs are retirement communities offering the full "continuum" of care including independent living, assisted living and health care (or skilled care). Many CCRCs also offer programs of care for Alzheimer's and other dementia in either a residential or medical model setting. Each CCRC has its own program for payment for services rendered. While I'm not aware of any retirement communities that "trade" independent living and nursing care for a house, that option may exist.Most commonly, potential retirement community residents sell their house and use the proceeds to finance moving into the continuing care residential situation they have chosen. Ideally, their initial move is into independent living. When the need for more service arises, this can be addressed through the use of home health services in their own CCRC residence, or by using assisted living or health care. In many instances, a specified sum of money is deposited with the CCRC up front. The amount of the deposit is determined by the rate schedule of the CCRC, which is based upon the type of living accommodations chosen by the resident, (i.e., apartment, duplex, fourplex, cottage, number of bedrooms, bath rooms and square footage). A portion of this deposit is normally non-refundable, such as 10% or 20%, and the balance is refundable if the resident leaves the CCRC or, in case of death, the refundable amount goes to the resident's estate. In some plans, the refundable portion of the deposit may be used, if needed, to fund assisted living or skilled care expenses. If the deposit is not needed for this purpose, or only partially used, the remainder is refunded to the resident, the resident's estate or to an appropriate designated beneficiary when the resident leaves the CCRC. Other financing options include a declining balance arrangement where the initial deposit made has a refundable portion, but the amount refundable declines by a percentage each month or year. When the refundable portion declines to zero, the resident is still entitled to remain in his or her residence as long as health permits, paying only the normal monthly fee, but there is no refund to the resident or resident's estate. Customarily, the deposit required in a declining balance arrangement is less due to the fact that the deposit declines in value to the resident. This may make it possible for someone to move into the CCRC who desires to, or needs to, make a smaller deposit. Some communities also have a monthly rental option that doesn't require any initial deposit and sometimes doesn't even require a long-term lease. In most instances, you'll find the monthly rental option is a higher monthly amount than if a deposit is made up front. This is because when either of the above deposit plans is used, there is interest and some specific portion of the principal deposited which can be used by the CCRC, in addition to the monthly fee, to help defray the expenses of the residence and services provided. How these programs work and which options are available depends, of course, on the system the community has in place.By entering a CCRC through independent living, your parents may have choices such as various apartment plans, duplex or four-plexes. In some CCRCs, they could even have the option of choosing a small house on the campus. Should they later need assisted living or health care, they would normally have priority admission to these levels of care within the CCRC. These services usually are provided for a basic monthly cost with an additional "level of care" charge. Size and amenities usually dictate the base monthly charge. You may want to discuss frankly what they can afford versus the size of residence they'd like to have.Be aware that not all retirement communities are continuing care. Many independent living retirement communities do not offer the additional levels of care. Nor do they offer all the basic services of a CCRC that make it possible for residents to live as independently as possible. This will be an important issue to discuss along with how the financing options provide for future services.A concern some people have about aging is that they may run out of funds, especially if they need to move into skilled care. While I cannot speak for the for-profit communities, many not-for-profit retirement communities have funds that are earmarked for assisting residents in covering costs if their financial situation is such that they can no longer pay for care. This is something you may wish to inquire about at any community you consider.Begin your search close to home with the Chamber of Commerce for the area where your parents want to live. In Kansas, the Kansas Association of Homes and Services for the Aging (KAHSA), offers a directory of not-for-profit retirement communities as does its sister organization in Missouri.If you want to become more informed on the different residential choices, here are some sites to get you started on the Internet:•  American Association of Homes and Services for the Aging............................... http://www.aahsa.org/public/ccrc.htm.  The link takes you directly to an article on selecting a continuing care retirement community. You'll also find a listing of member communities.• Continuing Care Retirement Community Information............................ http://www.eldernet.com/lifecare/lifecare.htm.  This site offers listings of available communities in each state.• Continuing Care Retirement Communities ............................................ http://www.bosbbb.org/lit/0029.htm.  This article contains some good questions to ask when choosing a Continuing Care Retirement Community.•  Continuing Care Accreditation Commission............................................. h.ttp://www.ccaconline.org/aflist.htm.  This site lists only those communities that have chosen to go through the voluntary CCAC process. You'll find valuable information on choosing a community. Keep in mind that a community need not be CCAC accredited to provide excellent services.When searching for information, you'll find several state and federal sites that may be helpful such as those hosted by your state's Department of Aging. Many of these are linked on the listings above. This list is only a starting point. Keep in mind that you'll find a number of sites that provide information based on who has paid to be listed on the site. That means you may find some valuable information, but may not find a complete listing of the available communities in the city or state you're searching.Long-term care insurance is a matter on which we do not counsel our residents other than to encourage them to investigate the options. Depending on the residence arrangement your parents choose, this may not be necessary, though it is always a sensible option to consider. Even at an advanced age, long-term care insurance can be a viable option if premiums fit the budget.A good place to start is with yours or your parents' insurance agent(s) for life, home and other insurance or with legal counsel. Many companies are adding or have offered long-term care insurance as an option to existing customers. In fact, your parents or yourselves (if you're over 50), may have already received literature by mail from some of the large providers who are very actively pursuing this business.You'll find many sites on the Internet to research long-term care insurance, so here are a few to help get you started:National Long Term Care Insurance Buyer's Advocate Alliance........................ http://www.longtermcareinsurance.org/i-faqs.html.  You'll find information on long-term care insurance and opportunities to obtain free quotes.Long Term Care Insurance Information.http://www.ltcinsurance.com/ltcquote247.html.  This site offers information and a free long-term care insurance quote.Of course, you'll find a multitude of insurance company sites that also offer premium quotes along with information on long-term care insurance.I hope this information helps you further your discussion with your parents. You have taken a valuable first step - talking with them to find out their wishes and express your concerns. Keeping the discussion honest and heartfelt, listening carefully to them and asking that they do the same with you will help you all come to the right decision. The trick is finding the choices and financing options that enable them to continue to live the way they want to live or as nearly so as their circumstances and condition of health will allow.