August 28, 2026
4:23 am

What Is a Type A CCRC Contract?

A Type A contract at a continuing care retirement community is the “life care” version: you pay a large one-time entrance fee and a monthly fee, and in exchange the monthly fee stays substantially the same if you later move from independent living into assisted living or the skilled nursing wing. You are pre-paying for future care at today’s price, and the community absorbs the risk that you will need a great deal of it.

That is the whole idea in two sentences. Everything difficult about a Type A contract lives in the documents, and this page is organized around the specific documents and moments where families actually run into the term — the marketing folder, the state disclosure statement, the residency agreement, the annual tax letter, the refund clause, and the day the money runs short.

The figures below are given as ranges from public survey and disclosure sources and are stamped to the years they describe. Entrance fees and monthly fees at continuing care communities move every year, and a Type A contract is one of the largest financial commitments most households ever make outside a house. Confirm every number with the community’s current disclosure statement and with the state agency that regulates continuing care in your state before you sign anything. Pine Lake Legacy provides education and a free policy review only; this is not legal, tax, or investment advice.

In This Article

Where You First Meet It: The Marketing Folder and the Four Contract Types
Where the Real Numbers Live: The State Disclosure Statement
The Benevolence Clause and What Happens If the Money Runs Out
The Refund Clause: The Part That Determines What Your Heirs Receive
The Annual Tax Letter, and the Deduction Most Residents Miss
How Families Actually Fund the Entrance Fee, Including a Life Insurance Policy
Frequently Asked Questions

Where You First Meet It: The Marketing Folder and the Four Contract Types

Sales staff will describe the community’s contract as Type A, Type B, Type C, or rental, and those labels are industry conventions rather than legal definitions. Type A is life care: high entrance fee, high monthly fee, and the monthly fee holds roughly steady across levels of care, usually with a modest increase for additional meals when a resident moves to assisted living or skilled nursing.

Type B is modified: a lower entrance fee, and a defined allotment of higher-level care included — commonly a fixed number of days in the health center, or care at a discounted rate — after which the resident pays market rates. Type C is fee-for-service: the lowest entrance fee, guaranteed access to the health center, but the resident pays the full daily rate for assisted living or skilled nursing when they need it. Type D, sometimes called rental, has no entrance fee at all and works like month-to-month senior housing with priority access to care.

The trade is straightforward. Type A converts an unknown future care cost into a known monthly cost, which is insurance in everything but name. Type C keeps your money in your pocket and leaves you exposed to the full cost of care later. As of 2024 and 2025 industry cost-of-care surveys, private-pay skilled nursing has commonly run in the range of roughly $9,000 to $11,000 a month nationally, with wide state variation — that exposure is what a Type A contract is buying down.

Ask for the contract type in writing, and ask specifically what the monthly fee becomes at each level of care. “It stays the same” is a sales sentence. The residency agreement is where the actual answer lives.

Where the Real Numbers Live: The State Disclosure Statement

Most states regulate continuing care communities and require an annual disclosure statement before a contract is signed — typically administered by the state insurance department, a department of aging or social services, or a dedicated continuing care commission, depending on the state. Ask which agency regulates the community and ask for the current disclosure statement by name. A community that hesitates is telling you something.

The disclosure statement is where you find audited financial statements, occupancy rates, the number of days of cash on hand, actuarial funding status where the state requires it, planned fee increases, and the history of past fee increases. That history is the number to focus on. A Type A contract protects you from care-level cost increases; it does not protect you from general annual increases in the monthly fee, which communities apply to everyone.

Entrance fees vary enormously by market and unit size. Public disclosure filings and industry surveys in the 2023 to 2025 period have commonly shown entrance fees ranging from roughly $100,000 at modest communities to well over $600,000 for larger units in high-cost markets, with some communities above $1,000,000. Treat any single national average as close to meaningless; get the actual fee schedule for the specific unit you are considering, in writing, and dated.

Two questions that separate serious buyers from browsers: what happened to the monthly fee in each of the last five years, and what is the community’s policy if a resident outlives their assets. Which brings us to the clause that matters most.

The Benevolence Clause and What Happens If the Money Runs Out

Many not-for-profit communities include a benevolence or financial assistance provision stating that a resident who exhausts their resources through no fault of their own will not be asked to leave. This is frequently the emotional centerpiece of the sales conversation, and it is often genuine. It is also almost never an unconditional guarantee.

Read the actual language. Common conditions include: the resident must have entered with sufficient assets and not given money away; the community’s board retains discretion; assistance depends on the availability of a benevolent fund; and the resident may be required to move to a different unit. Ask for the size of the benevolent fund and how many residents it currently supports. Ask whether assistance has ever been denied.

Ask a separate, blunt question: is the health center Medicaid-certified. Many continuing care communities’ skilled nursing units are not, which means that a resident who exhausts assets and needs Medicaid may have to leave the community entirely. That is a materially different outcome from what the brochure implies, and it is checkable — the community can tell you, and Medicaid certification status for skilled nursing facilities is public through CMS Care Compare.

Where a resident is heading toward Medicaid, the interaction between a refundable entrance fee and Medicaid eligibility is complex and state-specific. A refundable entrance fee can be treated as an available resource in some circumstances. Do not guess. Take that question to an elder law attorney and your state Medicaid agency, and see how a Medicaid spend-down actually works for the general mechanics.

Contract Type	Entrance Fee	Monthly Fee at Higher Care Levels	Who Bears Care-Cost Risk
Type A (life care)	Highest	Substantially unchanged, often a small meal adjustment	The community
Type B (modified)	Moderate	Set days or discounted care included, then market rates	Shared
Type C (fee-for-service)	Lowest with an entrance fee	Full market rate for each level of care	The resident
Type D (rental)	None	Full market rate	The resident

The Benevolence Clause and What Happens If the Money Runs Out

The Refund Clause: The Part That Determines What Your Heirs Receive

Entrance fees come in refundable and non-refundable forms, and the choice changes both the price and the estate. Common structures as of 2026 include a declining refund that amortizes to zero over a period of months, and guaranteed refund options at roughly 50, 75, or 90 percent of the entrance fee, payable to the resident or the estate after the unit is reoccupied.

Three details determine whether the refund is worth what it appears to be. First, the trigger: most contracts pay the refund only after the unit is resold or reoccupied, not on a fixed date, which means a soft market can delay payment for a long time. Second, the amortization schedule: a declining-refund contract may lose several percent per month, so a resident who dies in month eight receives far less than a family expects. Third, whether the refund is a general unsecured claim against the community — in almost every case it is, which is why the community’s financial condition in the disclosure statement is not an academic question.

Our deeper discussion of how entrance fee refunds are calculated and when they are actually paid covers the mechanics. Bring the specific refund clause to your own attorney before signing, and ask the community for a written illustration of the refund at year one, year three, and year ten.

Note also that the higher-refund options cost more upfront — often substantially more — and that the difference is money you cannot use for anything else. For some households the non-refundable option plus keeping the difference liquid is the better plan. That is a conversation for a fee-only financial planner, not a sales director.

The Annual Tax Letter, and the Deduction Most Residents Miss

Once a year the community sends residents a statement showing the percentage of fees attributable to medical care. This is not a courtesy document. Because a Type A contract prepays future health care, a portion of both the entrance fee and the monthly fee may qualify as a deductible medical expense under Internal Revenue Code section 213, subject to the section’s threshold for medical expenses as a percentage of adjusted gross income and to itemizing.

For a resident who paid a $400,000 entrance fee and receives a letter stating that 35 percent of it is attributable to medical care, that is a very large first-year deduction — and it is routinely missed by tax preparers who have never seen a continuing care contract. Give the letter to your CPA and ask specifically about the medical expense allocation in the year of entry and in each subsequent year.

A second tax provision applies to large refundable entrance fees. Internal Revenue Code section 7872 treats certain below-market loans as generating imputed interest, and it contains a specific exception for continuing care facility contracts with an inflation-indexed dollar limit and an age requirement for the resident. Whether your refundable entrance fee falls inside or outside that exception depends on the current indexed figure, which changes annually. Ask your CPA for the current-year number rather than relying on any figure you read online, including here.

These are the two most consequential tax items in the entire arrangement, and both are self-service — nobody at the community will file them for you.

How Families Actually Fund the Entrance Fee, Including a Life Insurance Policy

Most residents fund the entrance fee from the sale of a house. When the house has not sold, or is not enough, the shortfall conversation begins — and this is where an in-force life insurance policy sometimes enters the picture. Be careful here, because the answer varies more than sales staff suggest.

If the policy is a small final expense or burial policy of $10,000 or $25,000, leave it alone. It is too small to matter to the entrance fee and it may be doing real work covering funeral costs, sometimes inside a state’s burial exclusion for benefits purposes. If a surviving spouse still depends on the death benefit, leave it alone. If the insured is in strong health for their age, the secondary market is unlikely to be interested and the premiums are probably affordable anyway.

Where an in-force policy is genuinely worth examining: a face amount above roughly $100,000, an insured typically over age 65, a meaningful decline in health since the policy was issued, and a premium the household will struggle to carry alongside a monthly community fee. In that combination the four options are keep paying, reduce the face amount to a sustainable premium, surrender for cash value, or find out whether the policy has secondary-market value. A settlement generally takes 60 to 120 days from first review to funded payment, which is slower than most entrance fee deadlines, so start early or plan a different bridge.

Note the interaction: a lump sum received from a policy sale is a countable asset for needs-based benefits and may be taxable in part. Route the tax question to your CPA and the benefits question to your state Medicaid agency, an elder law attorney, or a State Health Insurance Assistance Program (SHIP) counselor. For a free, no-obligation read on the policy itself, send the cover page and the most recent annual statement, or call (732) 978-9575. Pine Lake Legacy does not purchase policies. If you are still comparing communities, our page on what to work through before moving to a CCRC covers the wider decision.

Frequently Asked Questions

Does a Type A contract mean my monthly fee never goes up?

No. It means the fee does not jump when you move to assisted living or skilled nursing. Communities still apply general annual increases to everyone. Ask for the actual monthly fee increase in each of the last five years, in writing, from the state-required disclosure statement rather than from the sales brochure.

Is any of the entrance fee tax deductible?

Often a portion is. Because a life care contract prepays medical care, communities issue an annual statement showing the medical percentage of fees, which may be deductible under Internal Revenue Code section 213 subject to the income threshold and itemizing. Give that letter to your CPA and ask about the year of entry specifically.

What happens if I run out of money?

Read the benevolence clause and take nothing on trust. Ask whether assistance is discretionary, how large the benevolent fund is, and whether the skilled nursing unit is Medicaid-certified. If it is not certified, a resident who needs Medicaid may have to leave. Verify certification through CMS Care Compare and the community directly.

When is a refundable entrance fee actually paid back?

Most contracts pay only after the unit is reoccupied, not on a fixed date, and the refund is usually a general unsecured claim against the community. Ask for a written illustration of the refund amount at year one, three, and ten, and read the community’s audited financials in the disclosure statement.

Should I sell a life insurance policy to fund the entrance fee?

Usually not, and sometimes yes. Leave small burial policies and coverage a surviving spouse depends on alone. A policy above roughly $100,000 with an insured over 65 whose health has declined may have secondary-market value worth checking. Expect 60 to 120 days, which is slower than most entrance fee deadlines.

How is a Type A contract different from long-term care insurance?

Both convert future care cost into a present payment, but a Type A contract ties you to one community and bundles housing with care, while a long-term care policy pays benefits wherever you live. A Type A contract also requires you to pass the community’s health and financial screening at entry.

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