The Purpose Of Entrance Fees
June 17, 2019
June 17, 2019
The life plan community concept began about a century ago when faith-based and other charitable organizations sought to provide lifetime shelter and care for the aging. In exchange for this promise, residents being cared for were usually required to assign most or all of their assets to the organization. Although well-intentioned, this model was less than scientific, and when residents lived longer than expected, there often wasn’t enough money on hand to fulfill the organization’s commitment.
In response to the short-coming of this model, the idea of entrance fees evolved. Rather than collecting the assets of a resident, organizations began establishing minimum entrance fees (combined with monthly fees) that were determined to be adequate to cover commitments.
After proving to be more effective, the entrance fee model eventually expanded to also offer refundable entrance fees. Many prospective residents responded more favorably to this approach because they knew that either they or their heirs would receive back some portion of the entrance fee if they ever left the community, or at death.
Today there are more than 2,000 life plan communities located throughout the United States offering non-refundable, partially refundable, and fully refundable entrance fees. Many providers offer multiple options from which to choose.
So, what is the purpose of an entrance fee? Primarily, the entrance fee helps secure a resident’s contractual access to a continuum of care. This is why life plan communities are the only type of retirement scenarios providing such a promise to its residents. In recent years, more rental-only life plan communities have evolved. However, under a rental contract, there is either no contractual promise to provide a continuum of care, or the monthly fee will be higher than a comparable entrance fee.
The money received from entrance fees is also used to help pay down, or limit, the amount of debt required for development, expansion, or occasional capital projects, which keep the community attractive and competitive in the marketplace.
Finally, many life plan communities- particularly non-profit providers- offer a financial assistance or endowment fund to help ensure that if a resident runs out of money due to a longer than average stay in the healthcare center, or some other unforeseen circumstance, they will not be forced to leave the community. Of course, this would not apply to any situation where a resident mismanaged or intentionally transferred personal assets in order to receive such support.
At Beatitudes Campus, the entrance fee for our Central Park Apartments and Patio Homes include 90 days of skilled nursing, memory care, or assisted living for each resident at no additional cost. The monthly service fee and the one-time entrance fee is up to 90% refundable, and you can enjoy the convenience of maintenance-free living with the security of a future healthcare benefit.
The above article was written by Brad Breeding of myLifeSite and is legally licensed for use.