Recent financial difficulties encountered by Erickson Communities illustrate some of the pitfalls CCRC residents can encounter. Erickson, a developer of continuing care retirement communities in several states, recently filed for Chapter 11 bankruptcy protection. Residents in their many care communities now face a very uncertain future.

Continuing care retirement communities, or CCRCs, offer their residents the opportunity to make one move to a community that then promises to provide whatever kind of care they might need in the future. When fully constructed, independent retirement living, assisted living, and nursing care are all offered on the same CCRC campus. In concept, this eliminates the need to ever worry about another move, no matter what health issues a resident might face.

Most CCRCs begin construction with independent living apartments. Assisted living and nursing facilities are often scheduled for completion over time. New residents move in with the understanding that higher levels of care will be available when they need such services.

Residents purchase the right to live in an Erickson or similar CCRC community with a large deposit, often called an "investment" or "buy in." These buy-in payments routinely exceed several hundred thousand dollars. Residents also commit to pay an additional monthly maintenance fee for their individual apartment or unit.

Although they have made substantial investments, independent living residents in several Erickson communities now face the very real prospect that the promised higher levels of care will never be constructed. Should these residents need assisted living or nursing care, they will have to leave the campus and seek care elsewhere.

Their "deposit" or "admission fee" is in Erickson's hands, and Erickson is not making refunds now that they are in bankruptcy, so anyone needing care still unavailable on their CCRC campus will have to cover the full cost of more care elsewhere out of other funds. After making the investment in their now bankrupt community, many will not have the financial means to do so.

According to news coverage, Erickson used residents' deposits to cover the costs of new construction at other communities. Residents' "investments" were not insured, placed in trust, or otherwise legally protected. As unsecured creditors, these residents are now last in line to receive any repayment after all other secured Erickson creditors have eventually been paid. It appears unlikely that they will receive anything near the amount they paid in, if they receive anything back at all.

While not every Erickson community is unfinished, and even when all levels of care have been opened, anyone moving into any continuing care retirement community should also be aware that there may not be "room at the inn" when a move becomes necessary. If the community assisted living or nursing facility is full, the community resident may still have to go elsewhere for care, at least temporarily. These are just the kind of disruptive and expensive moves that CCRC residents planned ahead to avoid.

What is happening right now at some Erickson communities is simply a warning to anyone contemplating moving to any continuing care "aging-in-place" community. Before signing on the dotted line, have the fine print of the contract thoroughly examined by your attorney.

Read more about the Erickson bankruptcy here:

http://www.baltimoresun.com/business/bal-bz.erickson20oct20,0,2332938.story

http://www.washingtonpost.com/wp-dyn/content/article/2009/10/30/AR2009103004219.html