Archive for the ‘Financial Planning’ Category

Gift Giving Traditions & Tax Consequences

December 9th, 2010 Vijaianand

It is December, holiday time to remember and   special time to cherish with your friends and family. Its also considered the special season of giving. Compared to last year, the charitable giving is much better according to the recent reports. Even when the economy still under waters and trying to be afloat, it is amazing to hear that people are still trying to give and share their joy with the needy.   

I just heard from radio today that Facebook founder Mark Zukerberg has signed up Giving Pledge, a Billionaire charity giving initiate started by Microsoft founder Bill gates and Mr. Warrent Buffet. He took the pledge to give away majority of his assets to charities around globe during his lifetime. That’s really amazing thing to do.

You can ask, “why should I have to give?”


Giving is all about sharing yours with others to bring happiness around you. According to law of attraction, by giving you attract more of it.  Many religions encourages to do charity in a great way. They usually recommend to give away atleast 10% of your earnings to charities. Giving not only satisfy our inner soul but also helps to save and get some money in return as an appreciation from Uncle Sam. Tax incentives is an added bonus encouraging many to give. There different ways of giving. You can give/gift to your family members/friends, to charity and may be to your business related people. Every gift giving has different tax consequences.


Tax Consequences


Family/Relative Gifting

If you give to family members or friends, gift tax might apply beyond the annual exclusion limit. Also just about anything you give away could be subject to gift tax. But there are exceptions to it.



1. Give with your whole heart to your sweet heart, you are free from all taxes. Yes, No gift taxes for transfers to a husband or wife. But one catch, if you give a terminable interest property to your wife in which your wife’s interests ends in the future date, you will have to file a gift tax return.


2. Pay directly to schools/colleges or hospitals to cover the tuition cost for your grand kids or medical expenses for anyone.  No tax need to be paid. These are called qualified transfers.

3. You can give as gift to anyone upto $13000 without any taxes and not filing any gift tax return. The annual exclusion is $13,000 for tax years starting from 2009. You wish to give away of than $13000, you don’t have to pay taxes immediately but you will have to file gift tax return Form 709 and let the IRS know about it. IRS will apply to the unified tax credit and defer until you finish all your credit. If you are married you can file the split gifts with your wife and give away upto $26000 without tax liability but must file gift tax return.


Charity Gifting


According to the poll conducted by Red Cross, While 86 percent of Americans reported their personal finances are the same or worse than last year, 72 percent expect to give the same amount or more than last year to charity. The poll also shows that the majority of givers plan to donate more than 100 dollars which is a good news for charities.


When it comes charity giving, no taxes liability for the donor rather donor would be eligible for some tax deductions depending on the property type and contribution value. To get deductions, you should satisfy certain formalities depending on your contribution amount.

For charitable contributions of less than $250, you must keep a canceled check, credit card receipt or electronic funds transfer receipt. Or you must have a letter from the charity acknowledging receipt of the contribution and stating its date and amount. If its $250 or more, you’ll also need a written receipt from the charity substantiating the amount of cash contributed and a description (but not the value) of any property — other than cash — contributed.



And you must disclose whether the organization provided any goods or services (such as a theater ticket or dinner) in return for the contribution.
If you donate property, such as clothing, valued at less than $250, you must keep a receipt from the charitable organization showing the charity’s name, contribution date, physical location of the contribution and a detailed description of the property (but not its value).



For larger donations, you’ll need even more documentation, including a description of how you acquired the property (purchase, gift, inheritance), the date you acquired the property and the original cost of that property. Donated property worth more than $5,000 requires a qualified appraisal, as do lesser-value objects that aren’t in “good” condition. 

Any personal service or volunteering your time won’t be eligible for deductions. But your commute mileage to volunteering would be eligibe. Also there is 50% and 30% AGI limitation on your contribution depending on the type of property and type of charity donated.  Also if a Tangible property like sofa or anything is not put in use for the purpose, it will have deduction limited to 50% FMV.



Any gifts to political organizations are not subject to gift tax, nor are they tax deductible.



In this Web 2.0 age, there are lot of ways to give with a click of a button. You can check websites like CharityNavigator, GiveWell, Philanthropedia  to contribute or check out VolunteerMatch.com to match with organizations to volunteer your time.

Business Gifting


If you are self employed or in business, you have to honor the relationship with people like clients, associates, and employees  in your buiness during this holiday times. Even small gifts goes a long way and those gifts are deductible up to $25 per year per recipient and deduct them on your income tax return. Mailing and wrapping paper, gift cards are considered are not included in the $25 cap.


But unfortunately $25 won’t be enough to satisfy different types of business people, and you might need to spend more than $25. In that case you have an option. You could take them out for dinner/lunch and claim it as meals and entertainment expense. These expenses are subject to a 50% hair cut but atleast better than a cheap $25 gift right!


Conclusion

Whether you are giving to family member/friends or to a charity or business related people, just keep in mind that you not only making someone happy but also making yourself indirectly by getting deductions or sharing your wealth. So give generously to charities and carefuly to others to avoid taxation.

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Maternity/Pregnancy Insurance – Claim and Appeal Process – Final Part

November 26th, 2010 Vijaianand

I hope you all had a wonderful Thanksgiving! I was finally able to relax and participate in a Turkey Trot 5k Run after taking my CFP exam last weekend. Now its wait game and I just need to wait for the exam results to come in 6 weeks.

I have more time to kill so let me finish the pending part on the Maternity Insurance. If you haven’t gone through previous posts, I recommend you check out Part 1 which introduces Maternity/Pregnancy Insurance and Part 2 discusses in details about important things to be considered.  In this last post of the series, I will discuss about the money saving part, Claims process and Appeal process if you ever need to appeal.

Like any insurance, deductible is considered as the risk rentention part where certain amount of risk is retained by the insured by paying deductible first and later expect insurance company to cover the rest according to the plan. The deductible serves as the stopping gate for the insurance companies to make sure consumer won’t go to the doctor for anything and expect insurance to pay for it. With deductible, insured always have to pay the cost until they reach the maximum deductible amount. 

It works the same way for maternity insurance (deductible plan only) as well where as you have Maternity deductible and Major medical deductible. Two deductibles run in parallel. So if you are visiting your regular doctor, its covered under Major medical deductible and when you visit your gynecologist for Maternity purpose, it will be covered under Maternity deductible.

Claims Process – Before Delivery



Anything related to the pregnancy like lab work, prescription all come under Maternity deductible. Don’t pay anything upfront. Let them process through your insurance carrier and they will send the statement after its processed. Match the statement of Claim from Insurance company and providers like labcorp and pay only the amount mentioned. These providers have standard agreed discount for each medical procedures so your insurance company will apply them and send you the final bill to be paid. You save money this way too when you have insurance. This amount is applied to your deductible.

Once you get closer to delivery date, your gynecologist office might ask to pay their charge for delivery if your deductible is high to avoid non-payment after delivery. Try to talk to them and pay may 1/3 of the charge. Also when you register in the hospital for the delivery, they also might ask you pay part of your deductible because of high deductible. Again talk to them and say you paid some to your doctor and can only pay certain amount. They will most likely work with you and accept it. 


Don’t over pay or fully pay your deductible amount which might cause problem later because insurance company only process claims after the delivery is over and they process them accordingly how they recieve it. If your doctor sends their claim for $3500 as their delivery charge and they get processed first. You might have to pay $3500 to your doctor alone as part of your deductible. So if you paid $2500 to doctor and $2500 to hospital to cover $5000 deductible, you won’t have money to pay the doctor pending $1000 to satisfy the deductible. Hospital might refund your payment if they get paid by the insurance but it takes time. That’s why don’t pay all your deductible before delivery. You have lot of time to pay it after delivery so just talk to your providers ask them to hold for a bit.

Claims Process – After Delivery

After the delivery, if its normal process and you usually stay in the hospital for 2 days with your baby, then all charges are covered under Maternity deductible. If the delivery is complicated means C-Section and baby is normal, your delivery is covered under Major medical coverage and baby’s charges are covered under maternity coverages. That’s biggest unknown factor and you should hope for the best. If you previously delivered baby in normal delivery, you are most likely to have the future ones normal as well. You just need GOD’s grace and hope things goes well.

Otherwise, you will endup paying to cover both deductibles. You better be ready if you have bigger major medical coverage. Also you shouldn’t surprised to recieve bundles of bills from other providers like Pathologist, Anesthiologist and others apart from Hospital and Doctor’s office.


Medical Codes – Normal Vs Complicated


You might have heard about medical codes which are the important aspect of claim’s process. Your doctor or hospital has to send proper medical codes for their treatment for the insurance to process the claim properly and pay for the claim. If the medical codes were messed up, they might reject or apply the coverage under different deductibles. That’s want happened in our case. It is a normal delivery with little complication which is usual and they have different codes compared to strict normal delivery.

In our case, Doctor’s office sent a code as normal whereas Hospital intrepreted what doctor noted and sent code as normal with small complication. So insurance company processed exactly the way they sent and doctor’s claim went to maternity coverage whereas hospital cliam went to Major medical coverage even though its normal delivery. Medical codes can have big impact on the claim so be watchful on how the cliams are processed.

Appeal Process


As I mentioned above, insurance company processed claims for the same delivery differently because of the medical codes. Because they processed the codes differently,  deductibles are messed up. So I started getting bills from other providers to pay them. At one point, I got bills to pay total of  $10,000-12000 which was a shocker. I never paid them. I immediately called insurance company to understand the problem and even conferenced with hospital to let them talk each other and same time find the underlying problem. After all that going back and forth 1 month, insurance company didn’t want to pay because the claims are done as per provider codes. Hospital don’t want to change because they were claiming correctly as per doctors notes. It ended up in deadlock situation. Meanwhile I had to call other providers and requesting them to hold on their bills, many of them put 30-45 days hold.

Only option given to me by Insurance company was to appeal the claim process. So I ended up drafting a detail appeal letter mentioning what happened and what was promised when the insurance was taken. They said any normal delivery is covered under maternity coverage and now they are changing it just because of codes sent by hospital and processing them as complicated. So I requested them to reprocess all claims as normal delivery because it not right to process some claims under normal and some as complicated. I know the appeal is worth a fight to save thousands of dollars.

It took almost 3-4 months for the appeal process to be completed and they finally accepted and reprocessed the claims which are wrongly processed as normal delivery. During this time, I had to call every provider to hold them off or just pay minimum amount to extend the due date. This way they won’t go to collection. Appeal process needs constant attention and follow up. You might have to contact hospital and collect documents and send to insurance company to speedup process instead of them waiting for months. You have to do as much as possible to get this process moving and help them make the decision so you can save money. This is the last route, if it didn’t work out I was planning to file a complaint to State Insurance Commissioner to take some action. But I am glad it didn’t go that far.



Conclusion


In summary for this 3 part Maternity Insurance, I want to say, Health Insurance is a must for a family and Maternity/Pregnancy insurance is very important for any family who doesn’t have group coverage to cover their pregnancy. If you want to face it without insurance, you might end up losing lot of your savings and have tough time with the providers which might worsen your financial wellness. So I strongly recommend to consider taken maternity insurance before planning to expand your family.

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Maternity/Pregnancy Insurance for Self Employed – Part 2

November 10th, 2010 Vijaianand

It has been more than 3 weeks since I posted anything in the website because I am so deep into CFP exam preparation which is coming up on Nov 19th and 20th. I literally don’t have time for anything and feel the 24hrs is really short period for a day. As some of you know, I have completed my CFP course and next milestone is to pass the exam. I been preparing for this exam since Aug and hope to pass the exam with GOD’s grace. I decided to finish this post which I started last month and take a break for the exam and come back later to update about my exam experience.



In the last related post about Maternity Insuarnce, I shared about our recent pregnancy experience with the cost associated with the process. We also saw some points on different ways to get a maternity coverage. In this post, we will see some important things to consider and finish up with the claim process which is really important to understand.



Important Things to Consider



How Maternity Insurance works?


You better understand how the Maternity insurance works so it will help you to keep up with benefits, bills and claims.



1. Get the Coverage first


As I mentioned in my early post, get the Maternity Insurance coverage first before getting pregnant. If you already have individual insurance, you should know that they don’t usually cover maternity/pregnancy. If they do, please confirm with your insurance provider about the benefits. May be there are few exceptions to some insurance carriers but 99% of the time they don’t cover it. In that case, you need to look for a coverage which can cover your pregnancy or  at minimium share some expenses.



If you already pregnant and hope to get a coverage, sorry to say that you only have less than 1% chance in finding any insurance provider. If you haven’t got pregnant yet and thinking about it, WAIT!! You better get the coverage before you get pregnancy positive.



2. Select A Proper Plan



As per my research last year, there is not much options for Individual maternity coverage. You will have a choose a proper plan which suits your needs out of 2 or 3 out in the market.  For example, Humana used to offer a plan in Texas which covers 50% of delivery cost with max of $5000 of you pregnancy and you have to pay the rest. The plan premium might cost you around $200/month and your coverage will be $5000. For an year with maternity expenses, you will get around $5000 off from you bill for the premium cost of $2400 for the year. It doesn’t cover anything else whether the delivery is complicated or normal. It is just an expense sharing mechanism.



On the other hand, Cigna(Assurant Health) plan which we bought last year is actually a good plan comes with your individual major medical coverage. So there is two parts to the coverage. One part which covers all major medical problems with a seperate deductible and out of pocket limit and the second part is totally for pregnancy and it has the deductible limit. We paid around $269/month for $5000 pregnancy deductible and $2000 major medical deductible with $2000 coinsurance max. It wasn’t bad compared to no coverage. It covers your normal delivery and complicated delivery will be covered under Major medical coverage. You can get the help of independent insurance agent like the one I used to find this insuarnce. My insurance wa Ruth in Houston, her website is instexas.com


 


3. Understanting Coverage Benefits



Like group health insurance,  deductible insurance plan with maternity coverage covers both Major medical and maternity but have different deductible for major medical and maternity. They both works in tandem and you have to fullfil the deductibles seperately. If you going for your normal medical exam or physician visit, Major medical coverage kicks in and you pay the deductible for the visit as per the plan. If you visiting your gyny for Maternity/Pregnancy purpose, your maternity coverage of the policy kicks in and you pay the expenses related to the visit to satisfy your deductible for Maternity Coverage. Usually, lab work, prescription, gyny visit you will end up paying first to satisfy the deductible.


Normally with these type of plan, insurance company have a waiting period of atleast a month before getting pregnant. They just want make sure you are not pregnant at the time of pregnancy. So be careful with the timeline, we were so close and just about a month when my wife got pregnant. It is decided by your gynecologist during your first visit.



4. Choose Gynecologist



Next comes choosing the right gynecologist. If its your first pregnancy and you been asking your friends and family to refer a good gyny, thats a good start. But in order for the Maternity insurance plan to work, you better find a gynecologist who is under their provider network. Seeing an In-network gyne is really important in reducing your expense and getting insurance to cover most of cost as per the network agreements. If you are seeing out of network, it might not be covered 100%, check with your provider. You have to decide whether choosing a gyne who is referred by friends and not in network or gyne who is good but covered in the network. I would consider the second choice and try to get a list of gyne close to you and checking it out.



5. Select right In-Network Hospital


Today most of Hospitals take all major insurance carriers. So this won’t be an issue but similar to the gynecologist selection, you need to find the hospital where you want to have your baby accepts the insurance plan/network. Also find out from them how much will be estimated cost/expense for delivery both normal and complicated. Try to check with them whether they have payment arrangements if paid without insurance. Sometimes these hospitals are ready to work out an deal to avoid insurance carriers and give discount to the consumer directly.



Assumption is dangerious and risky. So it is important to select the right plan, choosing the right gyne and the hospital which is covered by the maternity insurance carrier. Otherwise it will too late once you become pregnant and you will be wasting your money and end up losing your savings. These are five important items which needs to be considered and understood properly while taking your individual maternity/pregnancy insurance coverage.



I thought of completing the Maternity Insurance series by posting everything in this post but it’s already too long. So I decided to cover the rest of topics about Claims and Appeals process in the next post after exam.  I will see you guys after Nov 20th, wish me some luck.



Image source: business.rediff.com

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