Entrance Fee

Entrance fee is commonly used in reference to an up-front cost for continuing-care retirement communities, or CCRCs. Rather than purchasing a unit in a CCRC, residents typically pay a high entrance fee followed by regular monthly payments.

The entrance fee is paid in exchange for services provided at the CCRC, such as nursing care and other assistance throughout the lifetime of the resident.

With entrance fees, there are many financial, legal and medical issues to consider when choosing a CCRC. It is recommended that residents, their families and/or professional advisors research a prospective CCRC thoroughly before the entrance fee commitment is made.

The entrance fee amount varies widely depending on the senior's need for care at the time of entry, specific type of housing chosen and other factors.

Entrance fees can be structured several ways, say retirement experts. Declining scale refunds, also known as amortizing entrance fees, specify a period of time during which the entrance fee can be refundable to the resident on a declining basis.

"For example, if an entrance fee under this arrangement declines at the rate of 1 percent each month, after 6 months 94 percent of the entrance fee is refundable," according to the Consumer Guide to Understanding Financial Performance and Reporting in Continuing Care Retirement Communities.

Partially refundable entrance fees, promise a specific percentage of a refund that will be returned within a certain period of time regardless of the term of residency. "For example, 50 percent of the entrance fee may be refundable upon termination of the contract or to the estate upon the resident’s death," according to the guide.

And full refunds "offer just that, a full refund of the entrance fee. A fixed charge may be deducted before the refund is made, and the agreement generally states how long the refund is valid and under what conditions a refund is due. Entrance fees that offer full refunds are typically more expensive than those without refunds or those that are partially refundable or refundable on a declining basis."

As AARP explains it, CCRCs are "the most expensive of all long-term-care options," typically requiring "a hefty entrance fee as well as monthly charges."

That high cost is because such facilities offer care for all stages of elder retirees' living arrangements, allowing for movement to different facilities, usually on the same campus, as their needs for care increase.

They are "part independent living, part assisted living and part skilled nursing home," according to AARP. "Upon entering, healthy adults can reside independently in single-family homes, apartments or condominiums. When assistance with everyday activities becomes necessary, they can move into assisted living or nursing care facilities. These communities give older adults the option to live in one location for the duration of their life, with much of their future care already figured out."

But that sort of quality care and reassurance can come with a high price tag, with much of it paid upfront. With many CCRCs, "entrance fees can range from $100,000 to $1 million," said AARP.

"Monthly charges can range from $3,000 to $5,000, but may increase as needs change. These fees are dependent on a variety of factors including the health of your loved one(s), the type of housing they choose, whether they rent or buy, the number of residents living in the facility and the type of service contract. Additional fees may be incurred for other options including housekeeping, meal service, transportation and social activities.