The Retirement Community Wanted $400,000 Up Front, ‘90% Refundable.’ Families Learn What That Really Means When They Ask for It Back

Here is the sentence buried on page 34 of the contract that families miss: the 90% refund on a continuing care retirement community entrance fee is typically not paid when the resident dies or moves out. It is paid only after the unit is re-occupied by a new resident who has paid their own entrance fee. In a slow market, that wait can stretch for years.

That gap between the brochure and the closing documents sits at the heart of every continuing care retirement community, or CCRC, also sold under the friendlier label “life plan community.” The $400,000 check writes fast. The refund check writes on someone else’s schedule.

What the $400,000 Actually Buys

A CCRC bundles independent living, assisted living, and skilled nursing on one campus, with the promise that a resident can age in place. The entrance fee buys the right to live there and, depending on the contract type, some level of prepaid future care. It does not buy the apartment. Residents also pay a monthly service fee covering meals, maintenance, and amenities, and that fee continues for life and rises over time. According to NIC data cited by U.S. News in 2026, the average monthly fee reached $4,285 in 2025.

Three contract types drive almost all of the financial risk:

• Type A (life care): highest entrance fee, but the monthly fee stays relatively stable even if the resident moves to assisted living or skilled nursing. This is genuine insurance against catastrophic care costs.
• Type B (modified): a set number of covered care days, after which the resident pays market rates.
• Type C (fee-for-service): lowest entrance fee, with the resident paying full market rate for care when they need it.

A Type C contract with a “90% refundable” entrance fee looks cheap on the front end and can be brutal on the back end if a spouse needs memory care for five years.

What “90% Refundable” Really Means

Read the refund clause carefully. Four things consistently trip families up:

• Re-occupancy trigger. The refund is usually not owed until the unit is re-sold to a new resident. Estates wait.
• Original dollars, not appreciated. The refundable percentage is calculated on the original entrance fee, not on any appreciated figure, so inflation erodes the real value. A refund promised on a $400,000 fee paid in 2026 pays back in 2040 dollars.
• Front-loaded amortization. Many contracts amortize the non-refundable portion over the first months of residency, so a resident who leaves in year one can lose far more than 10%.
• Queue position. Ask how many refunds are currently outstanding and what the current average wait time is.

Solvency Questions Nobody Wants to Ask

The refund is an unsecured obligation of the community. If the operator enters bankruptcy, residents and estates become general unsecured creditors, standing behind bondholders and secured lenders. The risk is not theoretical. According to reporting by The Wall Street Journal cited in a July 2025 legal alert, at least 16 CCRCs nationwide filed for Chapter 11 protection between March 2020 and mid-2025, affecting over 1,000 families and erasing roughly $190 million in entrance fees.

Two cases illustrate what that means in practice. At The Harborside in Port Washington, NY, residents were owed an estimated $130 million in entrance fee refunds when the community filed for bankruptcy. A federal bankruptcy court approved an $86 million sale of the property in early 2025, with residents settling for about $42.5 million in total, roughly $0.25 on the dollar. At Friendship Village of Schaumburg, IL, residents discovered they would receive approximately 10% of their refund entitlements after the community’s bankruptcy sale. In both cases, bondholders were paid before residents received anything.

The underlying business model creates a structural fragility: new residents’ deposits fund former residents’ refunds. When move-ins slow, that chain breaks. State regulation of CCRCs is uneven, and not all states require meaningful reserves or public disclosure. Pennsylvania, Florida, and California police the sector more actively than most; a handful of states barely touch it. Ask which agency regulates the community and what it files publicly.

Where Medicaid Enters the Picture

Medicaid is the state-federal program that pays for custodial nursing home care after a resident spends down. Medicare, the federal health program for those 65 and older, does not cover long-term custodial care. A refundable entrance fee can be treated as an available asset for Medicaid eligibility purposes, and paying one can raise transfer and lookback questions under the 5-year rule.

A $400,000 refundable deposit can sit on the Medicaid asset ledger even though the family cannot access the money. What happens if a resident outlives their savings? Some communities maintain benevolent or charitable funds, but these are discretionary and not a guarantee. They are a hope, and families should not rely on them.

Due Diligence Before the Check Clears

Before signing, families that avoid surprises tend to ask for:

• Audited financial statements for the last three years.
• The current occupancy rate and the current wait time on refund payouts.
• How many refunds are currently outstanding, in dollars.
• The reserve ratio and any debt covenants.
• Whether the state regulates CCRCs and what disclosures it requires.
• An elder law attorney reading the contract before signing.

Rental-model communities do exist, and some operate without any entrance fee at all. They carry higher monthly costs and fewer campus amenities, but residents avoid writing the six-figure check up front and retain full liquidity. That model is worth pricing against the refundable-deposit structure before any decision is made.

Type A life care contracts at well-reserved communities can function as a rational financial hedge against a decade in memory care, though industry sources note the break-even point on a Type A contract typically falls somewhere between seven and ten years of residency. The phrase “90% refundable” does not work the contract never promised if the community is financially sound and the market moves new residents in promptly. It absolutely does not work if the community files for bankruptcy. Asking hard questions before signing is the only protection families have.

Editor’s note: This article was updated to include NIC data showing the average CCRC monthly fee reached $4,285 in 2025, and to add post-publication context on the wave of CCRC bankruptcies since 2020, including the Harborside and Friendship Village of Schaumburg cases in which residents recovered a small fraction of promised refunds.

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