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What Is a Life Care Contract and Why Do Seniors Choose Communities with Entrance Fees?

As we age, planning for long-term care becomes increasingly important. So, when exploring retirement communities and the costs of senior living, you’ll want to look for a community that sets you up with a good life today and a plan for care if you ever need it – all at a financial value that makes sense. Communities that offer a Type A Life Care contract do exactly this.

But what exactly is a Life Care contract, and why should you consider it a smart investment?

Types of Life Care Contracts

Life Care contracts are agreements offered by Continuing Care Retirement Communities (CCRCs), also known as Life Plan Communities, that outline the levels of care provided to residents as their needs change. These senior living contracts are categorized into three main types: Type A, Type B and Type C, each with distinct features regarding the services and costs involved.

The Type A contract provides the most comprehensive financial coverage. Residents pay an entrance fee that is largely refundable to them or their heirs if they leave the community, along with a monthly fee that remains relatively stable over time. In exchange, they enjoy independent living in a rightsized home and have lifelong access to a range of health services, including assisted living, skilled nursing and rehabilitation, if ever needed. This contract offers predictable costs for as long as the resident needs care.

The Type B contract requires a lower upfront investment than Type A. Under this contract, access to health care services may be limited to a predetermined number of days in the community’s health center without a resident’s monthly fees increasing – after which care is provided at full market rates. Or, ongoing care is provided at a slightly lower-than-market rate. Because contracts vary by community, always read them closely.

The Type C contract has the lowest entrance fee and monthly costs compared to Type A and B, but requires the resident to take on the greatest financial risk of any Life Plan Community contracts. Although access to care is assured, the resident will have to pay full market health care costs for services needed beyond independent living.

Why Is a Life Care Contract a Good Investment?

By opting for a Type A Life Care contract, residents secure their future health care needs at a stable, predictable cost structure. This proactive approach provides peace of mind for residents and their families, enhances quality of life and offers unique estate protections, making it a smart senior living plan.

Predictability

According to the Department of Health and Human Services, 7 out of 10 adults will need long-term care at some point for an average of three years, so it is important to have a plan for where you’ll receive care and how you’ll pay for it.

The primary advantage of a Type A Life Care contract is financial predictability. The entrance fee is largely refundable, and monthly fees will remain relatively stable even if a resident requires higher levels of care. In such a scenario, Type A Life Care protects residents from the ever-rising costs of care outside of the community, so it is important to have a plan that makes the most financial sense. This predictability clears the way for accurate financial planning without the fear of unexpected medical expenses depleting savings.

 

Life Care Contract vs Fee for Service Care infographic

Tax Advantages

With a Life Care contract, the entrance fee and a portion of the monthly fees may be tax deductible as prepaid medical expenses, potentially providing savings on annual taxes. Speak to a tax advisor for more information about the possible benefits of an entrance fee come tax season.

Life Care at Galleria Woods

Along with all the benefits of a Type A Life Care contract, at the right senior living community, you’ll find an array of amenities, activities and social events that make your investment even more worth it. To learn more about investing in Life Care, read our blog. For more questions or to schedule a visit of Galleria Woods, a Life Care community in Birmingham, contact us here or use our Community Chat Assistant.