Placing a loved one in an elder care facility is one of the most difficult decisions a family can make. You tour facilities, speak with staff, and meticulously review the care options, trusting that you’re choosing a safe and ethical environment. But what many families fail to scrutinize is the admissions contract—a dense, legally binding document signed during a time of great emotional stress. Buried within this fine print can be clauses that give the facility significant power over your loved one’s finances. In certain situations, these contracts allow elder care facilities to legally seize assets, making it nearly impossible to get that money back, even if you move your loved one out.
Here are six situations and contract types where a facility might be able to keep your family’s money.
1. Facilities Requiring a Large, Upfront “Community Fee”
Many assisted living and independent living facilities charge a one-time, non-refundable “community fee” or “entrance fee” upon admission. This fee, which can range from a few thousand to tens of thousands of dollars, is often described as covering administrative costs and the use of common areas. The contract will explicitly state that this fee is non-refundable, even if your loved one passes away or has to move out for medical reasons just a few days after moving in. Because you signed the contract agreeing to these terms, the facility is legally entitled to keep the entire amount.
2. Continuing Care Retirement Communities (CCRCs) with Life Care Contracts
CCRCs offer a long-term contract that provides a continuum of care, from independent living to skilled nursing. These often require a massive upfront entrance fee, sometimes hundreds of thousands of dollars. In exchange, they promise to provide care for the rest of the resident’s life. However, the contract dictates what happens to that entrance fee. Some contracts state that a portion of the fee is refundable to the resident’s estate after they die, but only after their unit has been “resold” to a new resident. This can take months or even years, during which the facility has use of the money, and your family has no access to their inheritance.
3. Facilities That Demand “Responsible Party” or Guarantor Signatures
This is a particularly dangerous trap. An admissions contract may include a line for a “responsible party” to sign, in addition to the resident. An adult child, wanting to expedite the admission process for their sick parent, might sign this without understanding the implications. While federal law prohibits nursing homes from requiring a third-party guarantor for Medicaid-certified beds, many facilities still use this tactic. By signing, you may have unknowingly made yourself personally liable for your loved one’s bills. If your parent’s money runs out, the facility can then legally sue you and go after your personal assets.
4. Contracts with “Duration of Stay” Clauses
Some assisted living facilities have contracts that require a minimum length of stay or penalize you for leaving early. For example, the contract might state that the resident must give 60- or 90-days’ notice before moving out. If your loved one has a sudden medical crisis and needs to move to a skilled nursing facility, or if they pass away unexpectedly, the facility can enforce this clause. They can legally charge you for the full 60 or 90 days, even though your loved one is no longer living there, effectively keeping thousands of dollars for an empty room.
5. Facilities That Become the “Representative Payee” for Social Security
If a resident is deemed incapable of managing their own finances, a facility can apply to the Social Security Administration (SSA) to become their “Representative Payee.” This means the resident’s Social Security and disability checks are sent directly to the facility. The facility is then responsible for paying for the resident’s care and managing a small personal needs allowance. While this is supposed to protect the resident, it gives the facility complete control over their primary source of income. It can be difficult for families to get a full accounting of how the money is being spent and to remove the facility as the payee.
6. Medicaid Pending Contracts That Lead to Private Pay Debt
When a resident’s funds are low, they may apply for Medicaid to cover their nursing home costs. During the weeks or months that the Medicaid application is pending, the facility will have the family sign a “Medicaid Pending” agreement. However, if the application is ultimately denied for any reason (even a technical one), the contract you signed holds the resident responsible for the full, private-pay rate for the entire period. This can instantly create a massive debt of tens of thousands of dollars, which the facility can then pursue legally against your loved one’s remaining assets.
Protect Your Family by Scrutinizing the Contract
The time of admission into an elder care facility is emotional and chaotic, but it is the most critical time to be vigilant. Never sign an admissions contract without reading every single word. Be wary of non-refundable fees, responsible party clauses, and long notice periods. It is highly advisable to have an elder law attorney review the contract before it is signed. This small investment upfront can protect your loved one’s life savings and prevent a difficult situation from becoming a devastating financial nightmare for your family.
Share a time when you were shocked by an unfair clause you discovered in a contract, whether for healthcare, a rental, or another service.
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