Mortgage protection planning prepares for the unexpected

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According to the Congressional Budget Office, of the roughly $2.7 trillion in 2011 national health expenditures, private insurance covered less than one-third. Federal spending through Medicare and Medicaid on health expenditures was just under one-third.

The balance of the out-of-pocket healthcare costs, or about $1 trillion, in 2012 was left to the American public. In 2012, the average cost for health care for a family of four exceeded $22,000.

In 2013, the U.S. census indicated that average household income was $51,017. Health care expenditures are volatile, especially with costs incurred in emergency room care.

It should come as no surprise that, according to a 2009 national study, medical expenses contributed to more than 62 percent of individual bankruptcy filings.

While these statistics and the impact of the Affordable Care Act vary with each family, it drives home the need for families to properly plan for medical contingencies.

This is especially true when considering how much to set aside for the purchase of a residence and its "nesting" costs. It is not just the mortgage, taxes and insurance, but the cost to purchase a new piece of furniture, crown molding in the living room or new high-dollar TV.

Families, old and young, must set aside monthly amounts for health contingencies or death. Don't be sad, though; these payments can be structured to be returned to you if you stay healthy.

With mortgage payments often exceeding 25 percent of monthly take-home pay, the minimum you can do to protect your family is to allocate the daily cost of drive-through lunch to a plan that can cover these costs.

How will you explain to your children that, for the cost of that new iPhone, you lost your house due to an unforeseen illness or death? Foreclosure proceedings are impersonal and simply relentless.

A properly structured asset or estate plan, including mortgage and critical period protection, can alleviate the struggles should the most valuable family asset (the ability to earn a living) suffer a loss due to illness.

With each mortgage payment, the family should allocate the "first-next payment" to wealth protection. This is how you preserve household equity and prevent a foreclosure due to unforeseen medical costs or death of a breadwinner.

Douglas S. Delaney, J.D., LL.M is a local tax and estate planning attorney in Bluffton. www.delaneylawfirmplansahead.com

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