Protecting Investments/Assets from Medical Bankruptcy?
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Posted Apr 13, 2022, 9:01 PM UTC · edited
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Trust fund. Especially one outside the country.
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A financial advisor can create LLCs that hide assets from lawsuits and bankruptcies.
Pretty sure guys like Mitt Romney have nothing in his name.
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Am a bankruptcy attorney. The words "hide assets" and "bankruptcy" should never appear in a sentence unless you want to get referred by the BK court to the FBI for investigation and potentially be prosecuted.
Often, it's the scorned ex-spouse that gets wind that someone wasn't honest on a BK petition and makes the call that gets the investigation started.
Pensions, 401(k) and IRA accounts are exempt assets. Meaning you can have your debts discharged and still retain the asset. IRA accounts didn't used to be protected but BK reforms in 2005 gave them exempt status. Prior to the 2005 changes, only employer based retirement accounts like the pension/401(k) had exempt status.
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What about creating a company? A trust?
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I'm Talking about legal methods that you implement years before.
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Yeah I always got the sense that the rich had a way to avoid this. When you get cancer would be a bad time to figure out that you got it wrong. I heard about trusts being used for this as well.
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Yeah it has to be done years before hand.
Another option I suppose is better insurance, multiple insurance plans or maybe umbrella insurance? I'm not sure why the insurance is not covering the medical bills in the cases you're seeing.
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That's what's so awful. You can go to a hospital that's in network, but has providers that are out of network. You can go to an emergency room that's out of network while you are unconscious and wake up a month later from an induced coma with a $1M bill. OR your insurance company can simply refuse to pay for a service that they previously agreed to pay for. You can't know what the bill will be before most services with any standard of certainty, and you can't very well choose to die rather than get it, if you insurance doesn't cover it. It's an industry built just to do this to people, and the closer you get to that industry, the more concerned you become about an error or deliberate and deceptive policy like this resulting in your bankruptcy.
Hell I had a patient this week come to us with a $430k bill that was in collections. Fully insured, yearly out of pocket maximum was fully paid out, but his treatment was nearly $1.5M and this was his co-insurance. That really got me thinking about wtf I'm gonna do to avoid this risk. If it could happen to this person (pretty smart investment banker) then it could certainly happen to my dumb ass.
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It depends on your state, really. Anything for retirement is off limits in bankruptcy, and there are many exceptions per state, like $X for a car, $Y for home equity, etc.
OK but because of such bad performance from my 401k, I began investing independently in a brokerage account for my retirement. Is there anything that can be done to protect those funds if they are not in a retirement-specific financial vehicle?
No. That is basically a savings account in the eyes of the bankruptcy court. HSA, whole life insurance, etc too. Anything that isn't specifically designated as a retirement account is fair game.
And if you have a S&P 500 or whole market fund in your 401k, at least do that so it 1: stays protected and 2: remains tax deferred plus 3: company match. You can always open up a Roth or traditional IRA to shield the funds too. If you make too much for either, open a non-deductible IRA as it is still protected fr bankruptcy.
Have you ever looked into precious metals? seriously, not as an investment per say but as a store of wealth and a relatively anonymous one at that. Might not shield everything but can save a decent chunk.