By:

Dave Kingsley

Macroeconomic Trends & Long-term Care Ownership

The long-term care industry reflects macroeconomic trends of the past half century.  With excess liquidity in the capital markets and increasing concentration of wealth in the hands of a small number of ultra-high net worth individuals, asset protection and finance have become major, if not dominant, purposes of corporate management.

An analysis of ownership structures in the nursing home business suggests that a large proportion of investment is driven by protection of personal/family, institutional, and corporate wealth. In the past few decades, state legislatures have passed legislation designed to provide secrecy and shelter from taxes, liability, and creditors.  Wealthy individuals avail themselves of these laws to keep their wealth intact and safe from the IRS and creditors during their lifetime and after their death.  Because of recent legislation, for example, South Dakota collects a large amount of fees for setting up the most protective of asset protection trusts.

States such as Nevada, Delaware, and Alaska are the most beneficial places to incorporate businesses and the shell companies (shell corporations have no offices and no employees) useful for hiding assets and keeping tax collectors and creditors at bay.  Long term care corporation ownership is mostly designed around processing funds through a network of Limited Liability corporations – many of which are shell companies.

Low- and middle-income Americans expend all their assets in long-term care before they find themselves in a position to ask for “welfare medicine,” i.e., Medicaid.   These are assets they would otherwise leave to their heirs. Personal and government funds are extracted by investors who use the tax codes to avoid meeting their obligations to support the public interest and repay the society enriching them.  A dollar in real estate related and other forms of tax avoidance is worth more than a dollar in operator profit.  Extraction from the mass of wage and salary workers by the wealthy exacerbates maldistribution and becomes a feedback loop in which inequity becomes continuously worse.  

The essence of the long-term care industry is the parking of capital owned by ultra-high net worth individuals in networks of entities designed for maintenance and enhancement of individual and family wealth.  Various forms of trusts are set up to protect and grow individual and family wealth.