Bankruptcy Medical Debt

Posted by Mike on Monday, 3 September 2012

Bankruptcy Medical Debt: What You Would like To Know
Bankruptcy because of medical debt is very common within the United States. It's a type of bankruptcy filed because of medical bills. It is the amount one reason why an individual resident file for bankruptcy next to job loss and poor usage of credit cards.

bankruptcy medical debt

What is Medical Bankruptcy?
Let us initial outline bankruptcy. Bankruptcy is a state wherein a sure person is unable to pay all debts from creditors. The debt can be a loan, personal debt, credit card charges, and therefore on. Conversely, medical bankruptcy may be a term commonly used to specifically talk to bankruptcy thanks to medical bills alone.
However, medical bankruptcy is not a legal term utilized in courts. The court continuously refers to “bankruptcy” as medical bankruptcy does not really exist. It will only be used during informal settings.

Bankruptcy and Medical Bills
The link between bankruptcy and medical bills were clearly presented after the statistical report of bankruptcies filed throughout 2007 with respect to the bankruptcies filed throughout 2001. The report was based mostly on questionnaires and telephone interviews conducted extensively throughout the United States.

According to the results, more than half of all the bankruptcies filed during 2007 were because of medical reasons and among them, a lot ofof them were found to possess health insurances. This reality has created it more appealing to American residents and up to now, it's still mentioned in each page on blogs and reports.

Can I File for Medical Bankruptcy?
Of course you can! Bankruptcy could be a government program that helps a bound individual cut loose from their debts at some purpose to start a brand new life. Sounds sensible eh?  Bankruptcy is also governed by its law to forestall abuse.

But can I file for my medical debts only?
 This question is usually asked and the answer to that is absolutely NO. Once more, medical bankruptcy will not very exist. If you would like to file bankruptcy thanks to large sums of medical bills, all alternative secured and unsecured debts can be included. Your creditors have the correct grasp be told about your action filing for bankruptcy.

Medical Debt Bankruptcy Drawback
You must bear in mind concerning the effects bankruptcy to your credit score. There could be a bound reduction of points from your current credit score relying on the degree of your case. It will take a while to bring it back to normal. In this situation, some creditors can not enable you to own debts and loans anymore. Additionally, you are not allowed to file for bankruptcy again for 6 long years.

Filing for medical bills bankruptcy will be a positive relief far from monetary hazard but you should be prepared for its consequences. Aside from bankruptcy, contemplate consolidation plans, debt counseling, and debt settlement as they are really useful. Treat bankruptcy medical debt as your last resort. Do not rush into it as you might need it more appropriately in the close to future.

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Using Life Insurance in Business Succession Planning

Posted by Mike on Saturday, 1 September 2012

Using Life Insurance in Business Succession Planning

Life insurance can play an important role in a business succession plan. Following are some of the common ways in which life insurance can be integrated with many of the tools, techniques, and strategies commonly used in business succession planning.

Estate Liquidity.
Some business owners will wait until death to transfer all or most of their business interests to one or more of their children. If the business owner has a taxable estate, life insurance can provide the children receiving the business the cash necessary for them to pay estate taxes. Using life insurance (owned by an irrevocable trust) to pay estate taxes is particularly useful to business owners because business interests cannot be readily liquidated. Life insurance is also a much easier (and less expensive) alternative to deferring estate taxes under IRC Section 6166. The children receiving the business may also need life insurance to pay estate taxes at their deaths. Typically, the insurance policy will be owned by an irrevocable life insurance trust so that the beneficiaries will receive the death proceeds both income and estate-tax free.

Estate Equalization.
A business owner can use life insurance to provide those children who are not involved in the business with equitable treatment. Leaving the business to the active children and life insurance (owned by an irrevocable trust) to the inactive children equalizes the inheritances among all of the children. It also avoids the need for the active children to purchase the interests of the inactive children – perhaps at a time when the business may be unable to afford it. Depending on the particular facts and circumstances, the insurance may be owned by an irrevocable trust for the benefit of the inactive children, and the insured(s) may be the business owner or the business owner and his spouse.

Buy-Sell Agreements.
A properly designed buy-sell agreement can guarantee a market and fair price for a deceased, disabled or withdrawing owner’s business interest; ensure control over the business by the surviving or remaining owners; and set the value of the business interest for estate-tax purposes. Life insurance is the best way to provide the cash necessary for the business or the surviving owners to purchase a deceased owner’s interest. In many instances, the cash surrender value in a life insurance policy can also be used tax free (by surrendering to basis and borrowing the excess) to help pay for a lifetime purchase of a business owner’s interest.

Nonqualified Deferred Compensation Plans.
A nonqualified deferred compensation (“NQDC”) plan can be used by a small business to provide members of the senior generation with death, disability, and/or retirement benefits. An NQDC plan may be particularly useful in those situations where the senior members have transitioned the business to the junior members and are no longer receiving any compensation from the business. An NQDC plan is also useful to ensure that key employees remain with the business during the transition period – a so-called golden handcuff. Because life insurance offers tax-deferred cash value growth and tax-free death benefits, it is the most popular vehicle for “informally” funding NQDC plan liabilities.

Key Man Insurance.
Many family businesses depend on nonfamily employees for the company’s continued success. To guard against financial loss due to the absence of an indispensable key employee, many companies take out key person life insurance.

Section 303 Redemptions.
IRC Section 303 allows an estate a one-time opportunity to remove cash from a corporation (equal to the amount of estate taxes and administrative expenses), at little or no tax cost, through a partial redemption of stock. To ensure that the corporation has sufficient funds with which to accomplish the Section 303 redemption, the corporation can purchase a life insurance policy on the shareholder’s life.

Hedge Strategy.
Life insurance can also be used to provide a hedge against the business owners premature death in connection with a grantor retained annuity trust. For example, if the business owner established a GRAT and died before the end of the set term, the life insurance could be used to pay the estate taxes on the GRAT assets that would be included in the business owner’s estate. In addition, if a sale with a private annuity is used, life insurance could provide funds for the business owner’s spouse (and/or other family members) since the annuity payments would terminate on the business owner’s death. Similarly, life insurance could provide funds for the business owner’s spouse and other family members should the business owner die prematurely after using a self-canceling installment note to sell the business interest. In all of these situations, it is advisable to have the life insurance owned by an irrevocable trust so that the insurance proceeds will escape estate taxes.

Family Bank.
When the decision is made to leave the business to both active and inactive children, it is usually advisable to leave the active children with voting interests and the inactive children with nonvoting interests in the business. In addition, put and call options can be given. Generally, a put option given to the inactive children allows them to require the active children (or the business itself) to purchase all or a portion of their interest in the business at a set price and terms. Without a put option, there may be no practical way for an inactive child to benefit from owning the business interest unless and until the business is sold. Conversely, a call option given to the active children (or the business itself) allows them to purchase the business interests of the inactive children upon a set price and terms. Without a call option, there may be no effective way for the active children to avoid the potential conflicts that can occur between the active children who are receiving salaries and bonuses, and the inactive children who are not. By having the active children own life insurance on the business owner’s life, a “bank” is created to provide the funds to satisfy any such puts and calls. Typically, the policy will be owned outside of the business entity, such as in a trust for the benefit of the active children or by a limited liability company owned by the active children.


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