It seems unlikely that a multimillionaire would want to move into assisted living. After all, rich people can afford round-the-clock home care if they need it.

Yet today's elderly affluent are flocking to continuing care retirement communities (CCRCs). The reasons are simple. Many don't want to be old and alone, even if it is in their own mansions. More importantly, a new breed of CCRCs are finally luxurious enough — and provide a good enough financial incentive — to attract the wealthy.

Seniors can now purchase, and build equity with, CCRC state-of-the-art multiple-bedroom homes in beautiful settings around the country. Lose the image of a bunch of 80-year-olds sitting on folding chairs around snack tables, playing canasta. Crème de la crème CCRCs boast championship 18-hole golf courses, multi-level yoga classes and 40,000-square-foot clubhouses.

“For people who want to be independent and socialize, it's a wonderful option,” says Douglas D. Pace, director of assisted living and continuing care at the American Association of Homes and Services for the Aging in Washington.

Many agree. Former New York City Mayor John Lindsay and his wife bought a place at The Cypress of Hilton Head Island in South Carolina, and lived there until their passing. So did William Batten and his wife; Batten was a former chairman of the New York Stock Exchange and president of J.C. Penney Company.

Luxury buy-in CCRCs started springing up in the 1980s. Today, there are about 60 such developments located throughout the United States. Many are in warmer climates like Southern California and the Carolinas.

They offer seniors the ability to purchase units, which can run from one-bedroom apartments in high-rise buildings to multi-bedroom low-rise villas to sprawling homes with garages and private yards. Prices start in the low hundred thousands and often soar into the millions, with maintenance fees that can exceed $6,000 a month. Waiting lists are up to 15 years at some and many, like The Cypress, bluntly advise in their brochure to join the wait list if there's at least a 50 percent probability that a potential buyer might want to move in within the next three years.

The ability to purchase homes in CCRCs has particular appeal to wealthy seniors who want to maintain equity in their estates. Typically, seniors enter into agreements to purchase individual units in retirement communities and pay a monthly fee for use of common facilities. While specifics vary, many luxury buy-in CCRCs are set up so that 90 percent of the purchase price is applied to owning the home; the other 10 percent (usually nonrefundable) is applied to membership in shared facilities. The monthly fee is based on the size and type of residence purchased.

Depending on the facility, the units usually are condominiums or cooperatives. Some CCRCs, like the Beaumont in Bryn Mawr, Pa., are in part structured like a homeowners association; residents elect their fellow members to join a board of directors. At the Beaumont, when a resident becomes a member of the co-op, he purchases a certificate of membership and obtains a “lifetime” lease for his living unit.

Not only do seniors have to be able to afford the purchase price and maintenance and think far enough ahead to get on a waiting list so that they might someday buy a unit, they also have to be healthy enough to move into their luxury CCRC homes when the time comes to buy. Minimum move-in ages generally start at 60 to 62 years. And, like most retirement communities that offer independent living units, high-end CCRCs require medical certification that purchasers and their spouses are in good enough health to live independently. Once a resident, however, seniors can stay until the end, even if they become ill. These equity communities don't usually require recertification of health, and some, like The Cedars of Chapel Hill, N.C., say that, as long as the applicant is certified able to live independently at the time he puts down the deposit, any change in health before the final closing will not disqualify an applicant.

WHAT'S INCLUDED?

Despite the hassles, seniors get a lot once they move into these communities. Of course, what's included in the monthly fee varies, but typically it's electricity, cable, housekeeping, laundry, linen service, maintenance, and a variety of community activities such as sports, lectures and excursions. Seniors also receive an average of about 30 communal gourmet meals a month. Almost all facilities have speedy Internet access for residents to email their grandchildren, as well as each other.

“There's [also] the satisfaction of knowing that there's care when needed,” says Pace. High-end CCRCs offer medical care in either the privacy of a resident's home, or in an on- site state-of-the-art health center. Monthly fees usually provide for a certain number of days in an on-site health center with no extra charges, or a certain number of days of nursing care at no extra cost (except, perhaps, for extra meals and special services). The number of days of “included” health care varies: residents at North Carolina's The Cypress of Charlotte get 90 days; at the Beaumont in Bryn Mawr, they get more than six months. Many CCRCs even designate wings of their health centers for residents with Alzheimer's disease.

If a resident's health declines so much as to necessitate permanent care, he often has a choice: remain in his home or move into the health center. For those who can remain in their home, CCRCs offer help with day-to-day care, such as personal hygiene and dressing. When a resident requires 24-hour care, he can move into a health center. The cost, both of the home care and health center living, is typically substantially lower than it would cost for the same service outside the retirement community — sometimes at a discount of 50 percent.

For investment-savvy retirees, there's one more financial advantage to these CCRCs: not only does the resident and ultimately his estate keep the equity in the units, but also, the units tend to appreciate. To date, most have appreciated between 3 to 4 percent annually since the time they were in existence, but The Cypress of Hilton Head has seen an 8 percent annual appreciation in value. However, communities differ on how they handle appreciation. In some, like the Beaumont in Bryn Mawr, the facility itself handles the resale of the unit and deducts a flat fee of $6,000; the rest of the resale price goes to the resident or his estate. In others, a percentage of the appreciation goes to the facility.

TAXES

Residents who own homes in these CCRCs may avail themselves of certain tax benefits. They may qualify to itemize a prorated share of their real estate taxes as a deduction.

There's also a question of whether, because these CCRCs combine residential living with medical care, homeowners in equity communities can deduct some of their monthly fees from their taxable income. Under Internal Revenue Code Section 213(a) taxpayers can deduct unreimbursed expenses for medical care, if the total medical expenses exceed 7.5 percent of a taxpayer's income. The issue becomes, therefore, what portion of a resident's monthly fees are allocable to medical care, and how does a taxpayer resident figure out that allocation?

The Tax Court addressed this issue in a Feb. 19 decision in Baker v. CIR, 122 TC 8. A couple living in an independent living unit sought to deduct 40 percent of their monthly fees as part of their Section 213 itemized medical expenses. In Baker, however, the couple did not own their unit; they rented their unit in a CCRC community. The Tax Court permitted the residents to use a percentage method to calculate their deductible medical expenses, but didn't allow the couple to deduct the cost of certain facilities, like the pool, spa and exercise equipment, because the couple didn't meet their burden of proof that these facilities were part of their medical care. While a resident might deduct a percentage of his monthly fees under Section 213, he should be prepared to substantiate how any additional expenditures are directly related to his medical care.

So is the age-old image of “nursing home” relevant to many affluent seniors today? The answer is “no” for those that want to keep owning their own homes but maintain an active social life within luxurious surroundings. Upscale CCRCs fill that niche and will most likely continue to do so, as many have plans to build similar communities in other locations.

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