Philanthropy Entrance Fee Rebate Programs

1. Leading Age, December 11, 2014
Entrance Fee Rebates
The Entrance Fee Rebates
The Future of CCRC Fundraising

2. Today’s Speaker
• Joe Anderson, President, ABHOW
Foundation
– Three decades of experience in senior
housing
– Twentieth year with ABHOW
– Sales and marketing experience
– National speaker on sales, marketing
and foundation work

3. The ABHOW Foundation
• Founded in 1968, separate corporation, separate
board of directors
– Assets of about $47,000,000
– Eleven CCRCs with endowments of $34,000,000
– Support 34 low-income communities
– Have over 240 charitable gift annuitants
– Have distributed more than $31,000,000 in
benevolence funds since inception

4. History of the Rebate/Refund
• Unknown or isolated cases prior to 1982:
– Some experimentation with equity return in various
forms
• Traditional amortizing entrance fees:
– Face value amortizes at a certain percentage per
month until no refund is due
– Standard percentages were 1.5% or 2% per month [50
to 66 month amortization period]
– Care for life guaranteed with contract but funded out
of endowment or operations funds
– Sometimes resident gave all assets in exchange for
lifetime care [fraternal approach]

5. Breaking Ground
• In 1982 Lifecare Services [LCS] introduces
its “Return of Capital” program:
– Beacon Hill
– Friendship Village
• Concept gains recognition and advances
on the positive coverage by Carter Randall
in the Wall Street Journal

6. Adoption By The Market
• Entrance Fee Refunds [Rebates in some
states] become significant options in the
1990s:
– Formulas developed to allow sponsors to
offer both amortizing and refundable entrance
fees
– Increasing home prices in the 90s and 00s
made more “equity” available. Asking for a
higher entrance fee became less of a problem

7. Support For Financing
• A larger entrance fee pool creates the
ability for a sponsor to pay down more
debt
• Almost all new communities built in the
last decade have offered 90% refundable
entrance fees with additional %s available
to Charter Members or early depositors.
• Other prominent options: 80%, 75%, 50%

8. ABHOW Entrance Fees
Year Rebateable E.F.s E.F. Rebate Pool
1990 0 $0
2000 8 $2,192,000
2013 460 $103,468,000
2017 815 $231,376,000
• Redevelopment of old communities:
• Terraces of Phoenix
• Judson Park
• Terraces of San Joaquin Gardens
• Addition of new communities:
• Terraces at Los Altos
• Terraces of Boise

9. Unintended Consequences
• Insurance policy for the sponsor
– Most contracts allow refunds to be drawn
down if resident runs short of funds to may
monthly fees
• Sales stimulant for adult children
– Amortizing fees were “lost money” to the
estate
• New bequest source for the Foundation
– Tell me more….

10. New Donation Source
• Entrance fee refunds or rebates are:
– An asset segregated at contract signing
– Do not grow in value – Because of inflation
they lose value
– Resident contracts allow the donation of a
dollar amount or percentage donation:
•Without involvement of family, an attorney,
financial advisor or broker

11. Sharing the Wealth
• Some evidence of the entrance fee rebate
being shared with other charities:
– Distributions to the CCRC sponsor at 100%
rate.
– Will distribute to other non-profits as
designated by the resident with a 5% charge
by the Foundation

12. Tax Implications
• Tax deduction for the entrance fee
donation
– The ABHOW accountants have determined
the tax benefit accrues to the estate, not to the
resident [No deduction in the year of the gift]
• Tax consequences for the estate
– If the resident knows there will be estate
taxes, the E.F. rebate is one way to gift and
avoid taxes.

13. Education of the Market
• Local Foundation committees
• Inclusion in all presentations to residents
• Inclusion in all presentations to local
boards and management teams
• Annual reminder presentation to sales
counselors
• Collateral material: EF Rebate brochure,
inclusion in newsletter, E-newsletter

14. Discussion