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What’s the Difference Between a Rental and an Entrance Fee Community?

A happy senior couple hugging

If you’re looking at senior living communities, it easy to get distracted by whether or not it has an entrance fee. However, when it comes to picking a community, what matters most is the type of contract they offer. That’s what will determine your future peace of mind and financial security. Lake Seminole Square is a Life Plan Community and offers a Life Care contract. There are rental senior living options that typically don’t have an entrance fee. To learn about the difference, and benefits, of each contract type, read on. 

Know Your Contract ABCs

There are several types of senior living contracts. Here’s a breakdown of your options: 

Type A (also referred to as Life Care)

At a Life Care community, like Lake Seminole, you pay an entrance fee, which is often partially refundable to you or your estate, and a monthly service fee. Type A contracts often ensure priority access to all levels of care the community offers at predictable, below-market rates. If you or your spouse need different levels of care, you’ll often pay just one monthly fee plus any additional meals needed. 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 3 years. If you ever need long-term care, having a Life Care contact can save you tens of thousands of dollars. 

Type B (also called modified plan)

These communities include housing and services and amenities, and just like at a Type A community, you’ll pay a one-time entrance fee and a monthly service fee. However, the care structure is vastly different. As part of your entrance fee, you may receive care in one of two ways: 1) a limited number of free days of health care, with additional days billed at per diem market rates, or 2) an ongoing, minimally discounted rate. However, if you and your spouse need different levels of care, you may end up paying two monthly service fees to cover those two different care levels. 

Type C (also known as fee-for-service)

Housing and services are provided, and the entrance fee and monthly service fee tend to be much lower than with the other two contract types. You may have access to care, but it will be charged at market rates, which are typically much higher than a Type A or B contract. Also, if you live in independent living but need care on a short-term basis, you may be required to pay your monthly service fee for your senior living residence, plus the costs of housing and the health care you receive. 

Rental 

Not all communities require an entrance fee rental communities charge you rent by the month. Some rental communities may have year-long leases while others might be month-to-month. People who choose rentals may prefer the flexibility; however, rental monthly service fees may be higher than what you’d pay in a comparable entrance fee community. Many rental contracts don’t offer on-site care or provide you with priority access to health care services. If you ever do need care, you’ll have to pay for it at full-market rates, while also covering your monthly rent.  

Why Do Senior Living Communities Have Entrance Fees?

For starters, your entrance fee is typically determined by the type of contract and the size of residence you choose. The more square footage, the higher your entrance fee, which not only covers your residence, but gives you access to any future care you may need.  

Your monthly service fee then covers the cost of the community’s services and amenities. At Lake Seminole, that includes things like a fitness center, indoor heated pool and hot tub, arts and crafts studio, woodworking shop, lakeside dock and pontoon, scheduled transportation and more. It also covers your meal plan and all interior and exterior maintenance and upkeep. With a Life Care contract, the monthly service fee you pay in independent living covers most of the cost of any future care, but it will go up a little to cover additional meals.  

Benefits of an Entrance Fee

If you’ve paid off your house, you can usually afford to move to a Life Plan Community that has an entrance fee. To receive the most financial benefit, it’s important to move to a community before you need a higher level of care. Here are some of the other benefits of a Life Plan Community:  

  • Peace of mind: When you consider the cost of higher levels of care over multiple years, it’s easy to see the financial security a Life Plan Community with Life Care can provide. 
  • Refundability: Some Life Plan Communities offer partially refundable entrance fees, providing you with estate protection by guaranteeing a specific percentage of your entrance fee will be returned to you or your estate within a certain period of time. 
  • Tax advantages: Residents of Life Plan Communities generally don’t pay property taxes on their community residences. You could also qualify for sizable tax breaks on portions of your entrance and monthly service fees. Be sure to check with your tax advisor before making your decision. 
  • Low resident turnover: Because the residents of a Life Plan Community are literally invested in where they live, the neighbors you meet and the friends you make when you first move in will likely be your neighbors for a long time to come. That way you can create meaningful relationships with those around you. 

Explore Your Options

To learn more about the value of Lake Seminole Square’s Life Care contract, schedule a personal visit by using our Community Assistant Chat Feature or contacting us here.