Protect assets from unexpected medical expenses

Many people get into big trouble when they have unpaid medical expenses. These expenses can threaten your home, savings or income. Without health insurance, a prolonged hospital stay can become a financial burden that can run into tens of thousands or even hundreds of thousands of dollars. If a reasonable payment plan is not initiated before treatment begins, the unpaid bills will become a major collection action shortly after the end of the treatment period. Depending on the state you live in, your home, savings, or other personal property may be foreclosed to offset unpaid medical bills.

Even if you do have insurance, the financial risk of co-payments, large deductibles and uncovered treatments can be significant. There are cases where out-of-network doctors are called in during a procedure without the patient’s knowledge or their approval. Some policies only cover a small portion of these costs. While the Affordable Care Act requires insurers to pay for these costs, there have been instances where parts of what should have been covered were not covered.

What happens if you receive medical treatment that costs tens or hundreds of thousands of dollars and your insurer denies the claim because of an unmet deductible, a co-payment, an out-of-network physician, or for a treatment or drug that is not approved? Who pays for the doctor and the hospital? If there is no insurance or the amount is limited, your doctor, hospital or other medical institution will require you to guarantee full payment of the billed costs, less the amount actually reimbursed by your insurer. The amount that your insurance company does not pay will be charged to the patient.

What happens if a patient cannot pay?

What happens if a large medical bill can’t be paid? Usually the result is a lawsuit filed by the hospital or a collection agency with a judgment and lien against the patient’s home and bills. In most states, a portion of the debtor’s earned income can be garnished. Many times before this point is reached, the patient files for personal bankruptcy to stop the garnishment of wages and eliminate the medical bills and other debts. This requires forfeiture of all assets, including savings, real estate and real estate shares. Some of these assets are exempt and, in the event of bankruptcy, are transferred to the court and distributed among the creditors.

How patients protect themselves against these events

Family Savings Fund

Wealth protection with an expressly designed Family Savings Trust can often protect savings against these events. A Family Savings Trust is exceptionally flexible in form and may contain provisions that merge the features of many domestic schemes into the language of the plan documents. Any of your assets can be placed in the trust, but governed by special terms and conditions appropriate to that asset.

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For those concerned about protection against unforeseen medical bills, a trust can be modified to specifically address the issue of medical expenses. The trust can be scheduled to hold your home, savings and brokerage accounts with the goal of protecting these assets from unexpected medical expenses. It is often designed to secure the home’s tax benefits (including the mortgage interest deduction, property taxes, and avoiding a profit on a future sale) while executing proper estate planning and wealth protection goals for the family’s wealth.