Entrance Fee Definition - Investopedia

The term "entrance fee" is commonly used in reference to an up-front cost for continuing-care retirement communities (CCRCs). Rather than purchasing a CCRC ... RetirementPlanning SeniorCare WhatIsanEntranceFee? Theterm"entrancefee"iscommonlyusedinreferencetoanup-frontcostforcontinuing-careretirementcommunities(CCRCs).RatherthanpurchasingaCCRCunit,residentstypicallypayahighentrancefeefollowedbyregularmonthlypayments. TheentrancefeeispaidinexchangeforservicesprovidedattheCCRC,suchasnursingcareandotherassistancethroughouttheresident'slifetime. KeyTakeaways Continuing-careretirementcommunities(CCRCs)usetheterm"entrancefee"forup-frontcostspaidtotheirfacilities.ResidentsusuallypayahighentrancefeetojoinaCCRCandthenmakemonthlypaymentssimilartorenttolivethere.Thepaymentofentrancefeescanbestructuredinmanyways,suchasadecliningscalerefund.AmongtheservicesprovidedatCCRCsarenursingcare,meals,housekeeping,andsocialactivities.Theamountofentrancefeesvariesdependingonmanyfactors,includingtheservicesofferedbytheCCRC,buttheycanrunashighas$1million. HowEntranceFeesWork Therearemanyfinancial,legal,andmedicalissuestoconsiderwhenchoosingaCCRCwithentrancefees.Itisrecommendedthatresidents,theirfamilies,and/orprofessionaladvisorsresearchaprospectiveCCRCthoroughlybeforetheentrancefeecommitmentismade.Theentrancefeeamountvarieswidely,dependingonthesenior'sneedforcareatthetimeofentry,thespecifictypeofhousingchosen,andotherfactors. Entrancefeescanbestructuredinseveralways,sayretirementexperts.Decliningscalerefunds,alsoknownasamortizingentrancefees,specifyaperiodduringwhichtheentrancefeecanberefundabletotheresidentonadecliningbasis. AccordingtotheConsumerGuidetoUnderstandingFinancialPerformanceandReportinginContinuingCareRetirementCommunities,"ifanentrancefeeunderthisarrangementdeclinesattherateof1%eachmonth,after6months94%oftheentrancefeeisrefundable." EntranceFeesandRefunds Accordingtothesameguide,partiallyrefundableentrancefeespromiseaspecificpercentageofarefundthatwillbereturnedwithinacertainperiodoftimeregardlessofthetermofresidency:"Forexample,50%oftheentrancefeemayberefundableuponterminationofthecontractortotheestateupontheresident’sdeath." Andfullrefundsofferjustthat:acompleterefundoftheentrancefee.Notethatafixedchargemaybedeductedbeforetherefundismade,andtheagreementgenerallystateshowlongtherefundisvalidandunderwhatconditionsarefundisdue.Entrancefeesthatofferfullrefundsaretypicallymoreexpensivethanthosewithoutrefundsorthosethatarepartiallyrefundableorrefundableonadecliningbasis. CurrentCostRangesforEntranceFees AsAARPexplainsit,CCRCsare"themostexpensiveofalllong-term-careoptions,"typicallyrequiring"aheftyentrancefeeaswellasmonthlycharges."Thathighcostisbecausesuchfacilitiesoffercareforallstagesofelderlyretirees'livingarrangements,allowingformovementtodifferentfacilities,usuallyonthesamecampus,astheirneedsforcareincrease. Theyare"partindependentliving,partassistedlivingandpartskillednursinghome,"accordingtoAARP.Uponentering,healthyadultscanresideindependentlyinsingle-familyhomes,apartments,orcondominiums.Whenassistancewitheverydayactivitiesbecomesnecessary,theycanmoveintoassistedlivingornursingcarefacilities. Thesecommunitiesgiveolderadultstheoptiontoliveinonelocationforthedurationoftheirlife,withmuchoftheirfuturecarealreadyfiguredout. AdditionalFees Butthatsortofqualitycareandreassurancecancomewithahighpricetag,withmuchofitpaidupfront.WithmanyCCRCs,"entrancefeescanrangefrom$100,000to$1million,"reportsAARP. Monthlychargescanrangefrom$3,000to$5,000butmayincreaseasneedschange.Thesefeesaredependentonavarietyoffactors,includingthehealthofyourlovedone(s),thetypeofhousingtheychoose,whethertheyrentorbuy,thenumberofresidentslivinginthefacility,andthetypeofservicecontract.Additionalfeesmaybeincurredforotheroptions,includinghousekeeping,mealservice,transportation,andsocialactivities. ArticleSources Investopediarequireswriterstouseprimarysourcestosupporttheirwork.Theseincludewhitepapers,governmentdata,originalreporting,andinterviewswithindustryexperts.Wealsoreferenceoriginalresearchfromotherreputablepublisherswhereappropriate.Youcanlearnmoreaboutthestandardswefollowinproducingaccurate,unbiasedcontentinour editorialpolicy. CARFInternational."ConsumerGuidetoUnderstandingFinancialPerformanceandReportinginContinuingCareRetirement,"Page2.AccessedJan.9,2021. CARFInternational."ConsumerGuidetoUnderstandingFinancialPerformanceandReportinginContinuingCareRetirement,"Page2.AccessedJan.9,2021. AARP."AARPGuidetoCaregiving,"Page17.AccessedJan.8,2021. AARP."CaregivingQuestionandAnswerTool."AccessedJan.7,2021. AARP."AARPGuidetoCaregiving,"Page17.AccessedJan.8,2021. 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