Capital Gain

Capital Gain (or Loss)
A contract with a 'capital gain' provision may afford some protection from inflationary effects over time.
Note:- Contracts with a capital 'gain' provision usually include a capital 'loss' provision.

WARNING - Some contracts calculate the Capital Contribution (aka the deferred fee) not on the initial entry price but on the eventual selling price.

This 'selling price' type contract will have an even larger impact on capital over time, eg: A deferred fee set at say 25% of an entry price of $500,000.00 produces a payment required of $125,000.00. For those village residents with a long period of occupancy and an exit price style contract, 25% of an exit price of say $800,000.00 produces a 'deferred fee' payment of $200,000.00, an extra $75,000.00.

This equates to a hidden deferred fee rate of 40.0% on the original $300,000.00 in-going paid.

There can be a vast difference in the capital value position of a retiree on leaving a retirement
village depending on - 1. whether the contract of occupancy grants any share of capital gains
to the resident and 2. even if granted whether any capital gains were achieved.

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