Protecting your Home and other real estate requires preemptive decision-making regarding the many options available. It is never as straight forward as moving cash or cash equivalents. The time-tested method of protecting your home has always been to strip the equity from the property.
In the past, having equity in your home or a paid-for property was something to rejoice and tell your neighbors about. Today, with the ongoing litigation explosion, you are advised to protect your home with much less fan fair. The reality is, when you have the slightest bit of equity built up in your home it will most likely be available to creditors.
If you are fortunate enough to live in a state with a generous homestead exemption, that portion of your home's value will be protected from creditors. Assuming that you may be able to get a loan against your property for a good percentage of the value of your home and then add in your homestead exemption, you may be able to get fairly close to the total value of your home.
A good example would be: if you live in California and you are married you can get a $250,000.00 Homestead exemption. Take a $750,000.00 home and put a $500,000.00 home equity loan against the property and viola, you have now made your home a very unattractive asset for a creditor.
If you end up on the wrong side of a court decision, the creditor will look at your property records and estimate the value of your home, the homestead exemption, the resulting equity and decide foreclosure is to time consuming and expensive.
Equity stripping or Equity Harvesting can be a pleasant solution when done properly. It may sound odd but putting on debt can result in great asset protection as well as great wealth transfer planning. Ideally, Equity Harvesting done correctly uses a “tax favorable” investment. Without belaboring the point in this brief article, the tools of choice typically are life insurance (because the money can grow tax-free and come out tax free) and annuities (because of tax deferred growth).
It may also be wise to learn the ins and outs of how mortgages are priced and to avoid the many pitfalls. We want you to know what your mortgage broker knows. Click here for our Mortgage - Equity Harvesting Course .
Instead of going into chapter and verse in this section about how to asset protect the personal residence, we have provided you a link where you can purchase and download a (10) page summary on how to protect your personal residence.
If you are interested in learning the best way for you to protect your residence, call us at TrustMakers for a free 20-minute consultation
Learn more about protecting your assets with these articles:
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