Many people face big problems if they have unpaid medical expenses. These expenses can become a threat to your home, your savings, or your income. Without any health insurance, a prolonged hospital stay can become a financial burden of tens of thousands or even millions of thousands of dollars. If a reasonable payment plan is not initiated before treatment begins, unpaid bills will become a major collection action soon after the treatment period ends. Depending on which state you live in, your home, savings, or other personal assets can be repossessed to offset unpaid medical bills.
Even if you have insurance, the financial risk of copays, large deductibles, and uncovered treatment can be significant. There are instances where out-of-network physicians are brought in during any procedure without the patient’s knowledge or approval. Some policies cover only a small part of these charges. Although the Affordable Care Act requires insurers to pay these charges, there have been cases where parts of what should have been covered were not.
What if you get medical treatment that costs tens or hundreds of thousands of dollars and your insurer denies the claim because of an uncovered deductible, copay, out-of-network doctor, or unapproved treatment or medication? Who pays for the doctor and the hospital? If there is no insurance or the amount is limited, your doctor, hospital, or other medical facility will require you to guarantee payment in full of the billed costs, less any amount actually funded by your insurer. Any amount not paid by your insurance company will be the responsibility of the patient.
What happens when a patient cannot pay?
What happens when you can’t pay a major medical bill? Typically, the result is a lawsuit filed by the hospital or a collection agency with a judgment and lien against the patient’s home and accounts. In most states, a portion of a debtor’s earned income can be garnished. Many times before reaching this point, the patient files for personal bankruptcy to stop the wage garnishment and eliminate medical bills and other debts. This requires the forfeiture of all assets, including savings, real estate, and equity in real estate. Some of this bankruptcy-exempt property will be turned over to the court and divided among creditors.
How do patients protect against these events?
Family Savings Trust
Asset protection with a purpose-designed Family Savings Trust can often protect savings from these events. A Family Savings Trust is exceptionally flexible in its form and can incorporate provisions, which blend the features of many household arrangements into the language of plan documents. All of your assets may be contained in the trust, but managed by special terms appropriate to that asset.
For those concerned about protection against unexpected medical bills, a trust can be customized to specifically address the issue of medical expenses. The trust can be planned to hold your home, savings and brokerage accounts to protect these assets from unexpected medical expenses. It is often designed to safeguard the tax benefits associated with the home (including the deduction of mortgage interest, property taxes, and the avoidance of gains on a future sale), while carrying out proper estate planning and asset protection objectives. assets for the family estate.