Estate Planning Blog

Tuesday, November 22, 2016

Questions to Ask When Considering a Retirement Home (by Kyle A. Krasa)

When I was a kid, one of the most popular sitcoms was Golden Girls.  I often watched it with my grandmother.  On a typical Saturday night in the 1980’s, my grandmother in her 70s, and I, an elementary school child, would laugh together at Rose’s St. Olaf stories, Blanche’s exploits, Dorothy’s bad luck, and Sophia’s witty yet insightful comments.  In college, a few of my friends and I agreed that when we were ready for retirement, we would get a house together and be the “Golden Boys.”  We’d share many adventures, discuss our latest dilemmas in the wee hours while eating cheesecake, and enjoy each other’s company.  It certainly is an ideal vision that seems to have universal appeal.

The reality of retirement living is more serious than sitcom fodder.  Concerns about declining health and an ever-increasing need for care often cause seniors to seriously consider moving into a retirement home that promises to care for them as they age.  While the concept seems simple on the surface, there are numerous risks that both the retirement home resident and the retirement home provider endure.  Indeed, the transaction is far more complicated than renting a pad in Miami with your best friends.     

At a recent estate planning conference I attended, I listened to a presentation from Anne Marie Murphy, an attorney with Cotchett, Pitre, & McCarthy, LLP, a law firm in Burlingame, California. She listed the following key issues to consider before deciding to enter into a retirement home.  

1.  Is the provider profit or non-profit?
2.  How long as the provider been in business?
3.  How many retirement homes does the provider operate?
4.  Have any of the retirement homes that the provider operates gone bankrupt?
5.  Has there been any litigation with respect to the retirement homes operated by the provider?
6.  Historically, how have monthly fees increased?
7.  How long is the current waiting list?
8.  What is the occupancy rate?
9.  Upon vacancy, what is the average time to re-sell?  What is the longest time to re-sell?
10.  Does the provider have any plans to build additional units at the site or nearby?
11.  Under what circumstances are entry fees repayable?
12.  Are funds returned only upon sale?
13.  Are funds returned if the resident leaves the apartment for a higher level of care and the apartment is resold?
14.  Are entrance fees kept local or are they transferred to a parent company?
15.  If entrance fees are transferred to a parent company, how is that reflected on the books?
16.  If entrance fees are transferred to a parent company, what responsibility does the parent company have to return the funds?
17.  Does the contract call the entrance fees “refundable” or “repayable”?
18.  Does the provider keep an entrance fund reserve?
19.  If the provider keeps an entrance fund reserve, how much is kept in the reserve and how is it calculated?
20.  With regard to the monthly fees, what are residents responsible for paying?
21.  Are the costs of the community isolated to the specific community or can the provider spread costs between its communities?
22.  How are marketing costs handled?
23.  How are taxes handled?
24.  How is insurance handled?  
25.  How much insurance is in place?  
26.  Is there earthquake insurance?  
27.  Is the insurance adequate?  
28.  What are the deductibles for the insurance?
29.  Does the company have money in reserve to cover deductibles in the event of a catastrophe?
30.  What role doe residents play in governance decisions?
31.  How much transparency is there with regard to the company’s finances?
32.  How good is management in taking into consideration resident concerns and preferences?
33.  Are there problems with there not being openings at higher levels of care when needed?
34.  How respectful is management when residents want to maintain independent living but with support?
35.  When an independent living resident needs to move to a higher level of care but there is no space, does the resident have to pay out-of-pocket for in apartment care?
36.  What happens when a spouse moves to a higher level of care?
37.  What amenities are available?
38.  Do residents have say in communal furnishings?
39.  If the community is affiliated with a religious denomination, is it in name only?

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