Many people face significant problems if they have unpaid medical expenses. These expenses can become a threat to your home, savings or income. Without any health insurance, a prolonged hospital stay can become a financial burden of tens of thousands or even hundreds of thousands of dollars. If a reasonable payment plan is not initiated before treatment begins, unpaid bills will become a significant collection action shortly after the treatment period ends. Depending on the state you live in, your home, savings, or other personal property may be seized to make up for unpaid medical bills.
Even if you have insurance, the financial risk of copays, high deductibles, and uncovered treatments can be significant. There are cases where out-of-network doctors are hired during any procedure without the patient’s knowledge or approval. Some policies cover only a small portion 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 happens if you get medical treatment that costs tens or hundreds of thousands of dollars and your insurer denies the claim due to an unmet deductible, a co-pay, an out-of-network doctor, or for a treatment or medication that is not approved? Who pays 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 full payment of the costs billed, less any amounts actually reimbursed by your insurer. Any amounts 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 the debtor’s employment income can be garnished. Many times before reaching this point, the patient files for personal bankruptcy to stop wage garnishment and eliminate medical bills and other debts. This requires losing all assets, including savings, real estate, and home equity. Some of these assets that are exempt in bankruptcy will be turned over to the court and divided among creditors.
How patients protect themselves against these events
Family Savings Trust
Protecting assets with a purpose-built Family Savings Trust can often protect savings from these events. A Family Savings Trust has an exceptionally flexible form and can incorporate provisions that merge the features of many national arrangements into the language of the plan documents. All of your assets can be contained in the trust, but managed under special terms appropriate for that asset.
For those concerned about protecting against unexpected medical bills, a trust can be customized to specifically address the issue of medical expenses. You can plan for the trust to hold your housing, savings, and brokerage accounts with the goal of protecting these assets from unexpected medical expenses. It is often designed to safeguard the tax benefits associated with housing (including deducting mortgage interest, property taxes, and avoiding gains on a future sale), while conducting proper estate planning. and asset protection objectives for family wealth.
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