Miz Suzie Needed A Place with Care; She Got A Lemon

An “orphan” elder, Miz Suzie knew she needed a professional fiduciary. One recent case came to ACE because the other professional fiduciaries Miz Suzie named had retired or expired.  An attorney was contacted to seek court approval of a professional fiduciary after Miz Suzie had passed away.

Her nieces and nephews did not live anywhere near her, and could not assist her. The made her an “orphan elder” or “solo ager. Upon her death, the assisted living residence (AL) continued to charge room rent until quite a few months later. Once appointed, we removed the personal property to stop the room charges. We thought we were finished with the AL.  Not so fast!

Miz Suzie had sold her beautiful home to move into a place which promised continuing “lifetime” care.  It did not appear she had used any care. She must have been an active and strong woman until she passed away, just shy of a year after signing a 300+ page contract and paying over $130,000 in entry fees. Miz Suzie did not consult an attorney before signing it.

As the matter progressed, it came to light that the AL company had filed for bankruptcy. The facility, where Miz Suzie’s money had been “escrowed” for her to use when she needed more care was now unable to pay employees, much less return the entrance fees due. Her estate was now a very small creditor in a very large bankruptcy case.  

Her heirs were understandably impatient to receive their share of inheritance. The snag was this. Did Miz Suzie’s estate have a viable claim against the company that promised; charged for; but did not deliver care?  Was her estate entitled to any of the refund stated in the contract?  Would her estate actually get any of the refund when the bankruptcy wound down?

Miz Suzi's heirs got the lemon.

The amount due was over $80,000.  The questions were not easy to answer because the bankruptcy process was more concerned with large creditors and finding a company to buy out the land. In this scenario, wise legal counsel advised along the way on the bankruptcy and the heirs have received a large portion of the entrance fee, awaiting the final payment amount due.

In the modern CCRC residences, the fee paid upon signing the contracts in California is often over $1,000,000.00, with absolutely no rights to title or equity.  Additionally, the monthly costs paid can be on average $3,500 or more. This is primarily for rent and food, not care. A CCRC development is attractive to younger residents, who want a nice place to live with the possibility that care will be provided as aging progresses.  It is a financial model designed to ‘buy out” the developer and pass on the management of the facility and care to a different company, much like a condo but without any real property rights given to the person paying the $1,000,000.00

If you are considering a contract with a large entrance fee or, ask your attorney to review it. Have your CPA review the financials for you annually. Afterall, $1,000,000 is a high price to pay if the operation becomes bloated with costs and  seeks bankruptcy. You would not want to find yourself trying to enforce that hefty contract alone if you become burdened with dementia.

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Loren Emmanuel