The range of housing options for older persons is enormous–from staying in your
own home or apartment, to home sharing, to moving to a senior housing facility or
development. The questions and answers that follow begin by exploring an important
financial option (home equity conversion) that may help you stay in your home, and then
end by describing the wide variety of housing choices that combine shelter with some
combination of recreational and social opportunities or supportive services and health
care. In all these areas, older persons need to be aware of the personal and financial risks
and benefits involved, and, above all, their legal rights.
Home Equity Conversion
Q. I own my own home, and do not want to move, but I’m having trouble
making ends meet. What can I do?
A. Home equity conversion plans can help you add to your monthly income
without having to leave your home. These plans fall into two broad categories: loans and
sales. Loan plans permit you to borrow against the equity in your home. They include
reverse mortgages and special-purpose loans on which repayment is deferred. They should
not be confused with “home equity loans” and “home equity lines of credit,” which require
you to make monthly payments immediately or risk losing your house.
Q. How does a reverse mortgage work?
A. A reverse mortgage lets you borrow against the equity in your home, receiving
a lump sum, monthly installments, or drawing on a line of credit. The amount of the loan
you will receive is based on your age, the value of your home and your equity, the interest
rate, the term of the loan, and some other factors. Except for some special-purpose state or
local government sponsored plans, like those designed to pay for home repairs, there are
no restrictions on how you use the money.
The loan usually does not have to be repaid until you sell, die or move from your
home. In some new plans, you can continue to receive payments even if you move. When
the loan does come due, the amount to be repaid cannot exceed the appraised value of the
Q. Who is eligible for a reverse mortgage?
A. A borrower must be at least sixty-two years of age, and own the property free
and clear, except for liens or mortgages that can be paid off with proceeds from the loan.
Unlike traditional loans or home equity lines of credit, the borrower’s income is not
considered. Only single family residences (including some condominiums) are eligible;
mobile homes, multi-family dwellings (including duplexes) and cooperatives are not.
Q. Are reverse mortgages available in my area?
A. Reverse mortgages can be obtained in more than thirty-five states and the
District of Columbia. The most common product are the federally insured Home Equity
Conversion Mortgage, or HECM and the “Homekeeper Mortage” available through Fannie Mae. Other products include state-subsidized home repair plans, lender-insured
plans, and reverse annuity mortgages.A consumer guide entitled Home Made Money and a list of reverse mortgage lenders is available from the American Association of Retired Persons, 601 E. Street,
N.W., Washington, D.C. 20049, telephone, 1-800-424-3410 or visit their website at
www.aarp.org. For more information, also contact the National Center for Home Equity
Conversion at 651-222-6775 or their website www.reverse.org.
Lenders today are showing greater interest in offering reverse mortgages now that
the Federal Housing Administration (FHA) is insuring reverse mortgages. Under FHA
rules, the homeowner must be sixty-two or older and own a home that has a very small
mortgage or no mortgage at all. The FHA limits borrowing to between $121,296 and
$219,849 for the year 2000. Under FHA rules, the borrower may receive the borrowed
money as a monthly income or a line of credit. This allows the borrower to use the money
for emergencies, such as medical care. For more information, the toll-free number is 1-
888-466-3487. Before signing on the dotted line, be sure to get professional advice about
the terms and conditions of a reverse mortgage.
Q. How will a reverse mortgage affect my other benefits?
A. The income from a reverse mortgage will not affect eligibility for social
security, Medicare or other retirement benefits or pensions that are not based on need.
However, without careful planning, the income from a reverse mortgage could affect
eligibility for Supplemental Security Income (SSI), Medicaid, food stamps and some state
In general, reverse mortgage payments are considered to be a loan, and will not
affect benefits if the money is spent during the month in which it is received. But if the
money is not spent during that month, it will be counted as a resource, and may lead to
termination of benefits. Be aware that payments received under the new reverse annuity
mortgage plans will be considered income, even if they are spent in the month in which
they are received.
Q. What about tax consequences?
A. There are two issues here. The first is whether the income from a reverse
mortgage is taxed. So far, it has not been, under the assumption that it is a loan advance.
Second is whether the interest can be deducted. Generally, interest cannot be deducted
until it is paid. Since the interest on a reverse mortgage is not paid until the loan comes
due, it cannot be deducted until that time.
Q. What other kinds of home equity conversion are available?
A. In addition to loan plans, you can generate income from the equity that you
have acquired in your home through sale plans. Sale plans include sale-leasebacks, life
estates and charitable annuities.
Q. What is a sale-leaseback, and how can I find someone who is interested?
A. In a sale-leaseback, you sell the equity in your home, but retain the right to
continue living there, often paying a monthly rent. The buyer usually makes a substantial
down payment to you. You act as a lender by granting the buyer a mortgage. You receive
the buyer’s mortgage payments; the buyer receives your rent payments, which are set
lower than the mortgage payments, so you gain a positive net monthly income. You
remain in the home, and can use the down payment and the mortgage payments as income.
The buyer can deduct the mortgage interest payment from his or her income, and will also
benefit if the value of the property increases.
Be aware, however, that the IRS requires that both the sale price and the rental
payments be fair market rate. Before 1986, the tax laws made sale-leasebacks good
investments, especially for adult children. Today, however, there are fewer tax
advantages, so finding an investor may be difficult.
Q. What if I sell my house, and keep a life estate?
A. In a life estate, or sale of a remainder interest plan, you sell your home to a
buyer, but keep the right to live there during your lifetime. The buyer pays you a lump
sum, or monthly payments, or both. You are usually responsible for taxes and repairs
while you live in the house but you pay no rent. At your death, full ownership passes
automatically to the buyer. This arrangement is most common within families, as part of
an estate plan. As with a sale-leaseback, it might be difficult to find an outside investor.
Q. What about a regular home equity loan?
A. A traditional home equity loan is very different from a reverse mortgage, and
can be a risk for an older person on a fixed income. As with a reverse mortgage, you
borrow against the equity you have built up in your home. But in a home equity loan, you
must make regular monthly payments, or you may lose your home.
There may be some tax advantages, however. Since it is no longer possible to
deduct interest on consumer goods such as car loans and credit card bills, many
homeowners have turned to home equity loans. With such loans, you can borrow up to
$100,000 on the equity in your first and second homes, use the money for any purpose,
and deduct all the interest you pay. You can even deduct the interest on a home equity
loan that exceeds $100,000 if you use the money for home improvements. If you’re not
going to use such a large loan for home improvements and still want to deduct the interest,
you must be able to prove that your home equity, plus improvements, equals the amount
of the loan.
Q. Is home equity conversion the only way to increase my monthly income?
A. Not necessarily. If you find that your monthly income does not meet your
expenses, you may be eligible for government benefits, such as Supplemental Security
Income, food stamps, or Medicaid. (See earlier section on income security in
this chapter). Some states also have property tax credit or deferral programs for which you
may be eligible. To find out more about these programs, call your local agency on aging.
You should consider all of the options available to you before you make your decision. If
you are already receiving public benefits, you should make sure that the home equity
conversion plan you choose does not affect those benefits.
Q. I am not sure that I can continue to live in my own home, but I would like
to stay in my community. What other choices do I have?
A. You have several choices, depending on your current and future health needs,
your financial circumstances, and your personal preferences, although not all may be
available in your community. There are home-sharing programs, in which homeowners
are matched with individuals seeking housing in exchange for rent or services; accessory
units that provide private living units in, or next to, single family homes; or assisted living
(described below), which combines a home-like setting with services designed to meet
individual needs. These programs may be privately owned and operated, government
supported, or sponsored by religious or other non-profit organizations. For information,
contact your local agency on aging.
Q. I have heard a lot about retirement communities that offer all kinds of
different services and amenities. What types of retirement community are available
A. In the last several years, there has been a large increase in the number of living
options for the elderly as both the public and private sectors attempt to respond to the
growing numbers of elders. The modern model of retirement community first sprung up in
the 1950s in the sun-belt states with senior communities that offered independent living
with a variety of social and recreational opportunities. Much has changed today. Between
the extremes of independent living and nursing home care, a variety of alternatives now
offer endless combinations of shelter plus services or amenities. Physically, facilities may
range from single-family type housing, to high-rise or garden apartment buildings, to
Facility definitions differ among states and sometimes even within states. For
simplicity’s sake, it is useful to distinguish three levels of community along a continuum
of services. At one end of the continuum are independent living communities. These offer
little or no health and supportive services, although they may have recreational and social
programs. At the opposite end are “continuing care retirement communities” (CCRCs).
These provide a fairly extensive range of housing options, care and services, including
nursing home services. In between are facilities that offer a wide variety of housing and
health or supportive services but not nursing home care. Today, these are commonly
assisted living communities, but they include facilities variously called “housing with
supportive services, “congregate care”, “board and care”, and “personal care homes” to
list just a few.
Q. Who sponsors and who regulates retirement communities?
A. Most retirement communities are developed privately, although many are
sponsored by nonprofit groups and agencies, including churches and charitable
organizations. All states regulate one or more types of assisted living, and most states
regulate continuing care communities, but the extent of regulation varies considerably
Q. What purchase or payment arrangements do retirement communities
A. Conventional independent living communities t without health services
typically involve home ownership or rental arrangements that are similar to standard real
estate purchases or rentals. Thus, these transactions are governed by local real estate or
landlord-tenant law, and residents pay the costs of their mortgage or lease, and
condominium or association fees if applicable. In facilities that promise additional
services, accommodations, or health care, the payment arrangement includes some
mechanism to pay for these added benefits. One may distinguish four basic types of
contract, based on payment arrangement, although keep in mind that state regulations may
categorize facilities differently:
1. “Turnover of assets” or “total fee in advance” contracts without monthly fees.
These types of contracts are all but extinct today. They were common in the
original continuing care communities, often called “life care” communities,
developed by religious or fraternal organizations. Many communities using this
model failed, because the assets received by the sponsors were not sufficient to
keep up with rising health care expenses of residents over their lifetimes.
2. Entrance fee plus monthly fee contracts. Entrance fees, ranging from $15,000
to over $200,000, are charged by most continuing care retirement facilities
today. An entrance fee may represent a partial prepayment for future services.
It normally does not buy an interest in the real estate. Increasingly, CCRCs are
providing greater refundability of entrance fees, even 100 percent
refundability, although this usually results in higher monthly fees. Residency
rights and obligations are governed by a long-term lease or occupancy
agreement. Monthly fees are subject to periodic inflation adjustments, and,
possibly, adjustments when the resident’s level-of-care needs change.
3. “Pay-as-you-go” contracts. With no entrance fee, these contracts are essentially
straight rental arrangements with a defined set of services included in the fee or
available when needed for an additional charge. Most assisted living and an
increasing number of continuing care facilities offer this arrangement. This
type of contract involves no initial investment, but is subject to greater changes
in monthly fees, since the resident assumes all or most of the financial risk for
4. Condominiums or cooperatives with continuing care contracts. Retirement
communities that offer an ownership interest to residents under a condominium
or cooperative arrangement with a service package included are relatively new
to the scene. These ownership/contractual arrangements are unavoidably
complex and bring with them special advantages and risks.
Q. What sorts of things do I need to consider before moving into a continuing
A. This is a major financial investment, frequently using up most or all of an older
person’s financial resources, so consider it carefully and seek professional advice from a
lawyer or financial advisor before you make a commitment. You may not be able to get
your money back. Be sure to visit the facility at length and talk to both staff and residents.
The following checklist highlights key questions you should ask:
Solvency and Expertise of the Provider
1. What is the provider’s background and experience? The provider is the person
or entity legally and financially responsible for providing continuing care.
Some facilities may advertise that they are “sponsored” by non-profit groups or
churches that in reality may have no legal control or financial responsibility.
Be wary if such illusory sponsorship is trumpeted in sales literature.
2. Is the provider financially sound? Have the facility’s financial, actuarial and
operating statements reviewed by a professional. Determine whether the
facility has sufficient financial reserves.
3. Are all levels of care licensed or certified under applicable state statutes
regulating continuing care, assisted living, and nursing home care?
4. How does the facility ensure the quality of care and services provided? Is the
facility accredited by any recognized private accrediting organization?
5. What is the entrance fee, and when can you get all or part of it back? The
facility should provide a formula for a pro rata refund of the entrance fee,
based on the resident’s length of stay, regardless of whether the facility or the
resident initiates the termination. Some facilities offer the option of fully
refundable entrance fees.
6. What is the monthly fee? When and how much can it be increased? What
happens if fee increases exceed my ability to pay? Some facilities have a
program that grants financial assistance to residents whose income becomes
inadequate to pay increasing monthly fees and personal expenses.
7. Will fees change when the resident’s living arrangements or level-of-care
needs change (for example, transfers from independent living, to assisted
living, to nursing care)?
8. What does my living unit consist of and to what extent can I change or
9. What happens if I marry, divorce, become widowed, or wish to have a friend or
family member move into the unit?
Services and Health Care
10. Exactly what services are included in my regular fees? Especially inquire about
coverage, limitations, and costs of the following matters:
· meal services;
· special diets/tray service;
· cable television;
· unit maintenance;
· linens/personal laundry;
· recreational/cultural activities;
Health & Personal Care:
· physician services;
· nursing care
· facility services;
· nursing services outside a nursing unit (for example, assistance with
· private duty nursing;
· dental and eye care;
· personal care services (that is, assistance with eating, dressing, bathing,
· homemaker/companion services;
· medication, and
· medical equipment/supplies
11. If the facility provides a nursing unit, what happens if a bed is not available
when you need it?
12. To what extent does the facility have the right to cut back, change, or eliminate
services, or change the fees?
13. Does the facility limit its responsibility for certain health conditions or preexisting
conditions? When can you become too sick or impaired to be cared for
by the facility? A pre-existing health condition is one diagnosed or treated in a
certain period of time before entering the facility.
14. Can you receive Medicare and Medicaid coverage in the facility?
15. Does the facility require residents to buy private insurance or participate in a special group insurance program for residents?
16. What are the criteria and procedures for determining when a resident needs to
be transferred from independent living to assisted living, or to a nursing care
unit, or to an entirely different facility? Who is involved in these decisions?
17. What rights do residents have to participate in facility management and
decision-making? How are complaints handled?
18. On what grounds can residents’ contracts or leases be terminated against their
19. What other rules and policies cover day-to-day operation of the facility?
20. Does the contract release the facility from any liability for injury to a resident
resulting from negligence by the facility or third parties? Such waivers should
Finding a Retirement Facility
· The American Association of Homes for the Aging publishes The Consumer’s
Directory of Continuing Care Retirement Communities, profiling not-for-profit
retirement communities around the country and providing an overview of CCRC
types, terminology, and features that consumers might want to consider. For ordering
information, contact AHAA Publications, 901 E Street, N.W., Suite 500, Washington,
DC 20004, telephone, 1-800-508-9442 or visit their website at www.aahsa.org.
· The American Association of Retired Persons has several brochures that can help you
make housing decisions. Contact AARP at 601 E. St., N.W., Washington, DC 20049,
telephone toll-free 1-800-424-3410, or visit their website at www.aarp.org.
· State or local agencies on aging frequently prepare directories or guides on housing
options for older persons and persons with disabilities. Find the agency’s number in
your local telephone book.
Nursing Home Care
Q. What is a nursing home?
A. A nursing home is a facility that provides: skilled nursing care and related services for
residents who require medical or nursing care; rehabilitation services for injured,
disabled, or sick persons; and health-related care and services, above the level of room
and board, that can be made available only through institutional facilities.
Often, nursing facilities make distinctions between levels of care–skilled and
custodial–for purposes of Medicare, Medicaid, or private insurance coverage. The
distinction between “skilled” and “custodial” care affects Medicare and is discussed
under “Medicare” above.
Only about 5 percent of people age sixty-five and older live in nursing homes at
any given time, but researchers estimate that older persons overall have about a 40
percent chance of spending at least some time in nursing homes. While some older
nursing home residents stay for extended periods, the majority stay in a facility less
than six months.
Q. How does living in a nursing home affect my personal rights and
A. You do not check your rights and privileges at the door when you enter a
nursing home. Although institutional care, by its very nature, substantially limits one’s
lifestyle and scope of privacy, one should nevertheless expect high quality,
compassionate, and dignified care from nursing facilities.
The federal Nursing Home Reform Amendments of 1987, and corresponding state
laws, protect residents in nearly all nursing facilities. For residents who lack decision
making capacity, the resident’s agent under a power of attorney for health care or another
legal surrogate recognized by state law (typically a family member) may exercise the
resident’s rights. Federal law requires that nursing homes meet strong basic standards for
the quality of life of each resident and for the provision of services and activities. Specific
rights guaranteed by federal and state law include the following:
Nursing homes must provide:
· written information about residents’ rights;
· written information about the services available under the basic rate and any
extra charges for extra services;
· advance notice of changes in room assignment or roommate;
· upon request, latest facility inspection results and any plan of correction
submitted to state officials;
· explanation of the resident’s right to make a health care advance directive–that
is, power of attorney for health care or living will–and facility policies on
complying with advance directives; (See discussion of advance directives on
under “Right To Control Your Own Affairs” below.) information
about eligibility for Medicare and Medicaid and the services covered by those
Each resident has the right to:
· participate in an individualized assessment and care planning process that
accommodates the resident’s personal needs and preferences;
· choose one’s personal physician;
· voice complaints without fear of reprisal, and to receive a prompt response;
· organize and participate in resident groups (such a resident council) and family
Personal and Privacy Rights
Residents have the right to:
· participate in social, religious and community activities as they choose;
· privacy in medical treatment, accommodations, personal visits, written and
telephone communications and meetings of resident and family groups;
· confidentiality of personal and clinical records;
· access to the long-term care ombudsman, one’s physician, family members,
and reasonable access to other visitors subject to the resident’s consent;
· freedom from physical or mental abuse, corporal punishment, and involuntary
· freedom from any physical restraint or psychoactive drug used for purposes of
discipline or convenience, and not required to treat the resident’s medical
· protection of resident’s funds held by the facility with a quarterly accounting.
Transfer and Discharge Rights
Residents may be transferred or discharged only for the following reasons:
· the health, safety, or welfare of the resident or other residents requires it;
· the non-payment of fees;
· the resident’s health improves so that he or she no longer needs nursing home
· the facility closes. Normally residents must receive at least thirty days advance
notice, with information about appealing the transfer and how to contact the
state long-term care ombudsman program. The facility must prepare and orient
residents to ensure safe and orderly transfer from the facility.
Protection Against Medicaid Discrimination
Nursing homes must:
· have identical policies and practices regarding services to residents regardless
of the source of payment (However, be aware that not all facilities participate
· provide information on how to apply for Medicaid;
· explain the Medicaid “bed-hold” policy–that is, how many days Medicaid will
hold the resident’s bed, or ensure priority re-admission, after temporary
· not request, require or encourage residents to waive their rights to Medicaid;
· not require a family member to guarantee payment as a condition of a
resident’s admission or continued stay;
· not “charge, solicit, accept or receive gifts, money, donations or other
considerations” as a precondition for admission or continued stay for persons
eligible for Medicaid.
Basic Quality of Life Standard for Nursing Homes
Federal law requires each nursing facility to “care for its residents in such a
manner and in such an environment as will promote maintenance of and enhancement of
the quality of life of each resident. Federal law requires each nursing facility to “provide
services and activities to attain or maintain the highest practicable physical, mental and
psychosocial well-being of each resident in accordance with a written plan of care that… is
initially prepared, with participation to the extent practicable of the resident or the resident’s family or legal representative.”
Q. What can I do if I think a nursing home is not providing adequate care or
respecting my rights?
A. Different problems require different responses. The following steps should help
resolve most problems. The order may vary depending on the problem.
1. Keep a log of the relevant details, including dates and personnel involved.
2. Try to resolve the problem informally by talking to supervising staff.
3. Many facilities have active resident councils or family councils. Bring the
problem before these groups.
4. Contact your long-term care ombudsman. (See below.)
5. Contact the state regulatory agencies that license, certify, and survey nursing
homes. Usually, the state department of health has this responsibility.
6. Contact a community legal assistance program, other advocacy organization, or private attorney experienced in long-term care issues.
Q. What is the long-term care ombudsman program?
A. The federal Older Americans Act requires every state to operate a long-term
care ombudsman program. The ombudsman is responsible for advocating on behalf of
nursing home residents and residents of other long-term care facilities, such as “assisted
living” or board and care facilities. The ombudsman provides education on long-term care
options and residents’ rights, and investigates and resolves complaints made by or on
behalf of residents.
Most states operate local or regional programs with paid or volunteer ombudsmen.
Residents and family members often find ombudsman staff to be essential partners in
resolving problems. Federal law requires nursing homes to allow the ombudsman access
to residents and access to resident records. In addition, the ombudsman usually has special
authority under state law to inspect records and take other steps necessary to respond to