August 23, 2017

Personal Residence Protection

Protecting the Marital Home/Personal Residence

For many clients, their home is their largest asset.  While times and attitudes are changing about having debt on a personal residence/home, much of the American public strives to “pay-off” their home as quickly as possible. Whether someone has paid down the debt on their home or not, most of the country has experienced significant appreciation on the value of the home.

What does the above paragraph mean?  It means that most clients who own houses have $50,000-$1,000,000 or more in equity in their homes.   While that sounds great (and it is), the one problem with having significant equity in a home is that in most states that equity is not protected and the home is an asset very much at risk to creditors from a negligence lawsuit.

How can you protect the equity in your home?

Unfortunately, there is no great answer for how to protect the equity of a client’s personal residence.   The following available, although not all well known, tools are ones you and your advisors need to consider when trying to protect the equity of your home.  Please click on the name of each topic to read more.

Homestead Exemption (not too useful except in states like TX or FL which have unlimited homestead exemptions (although now limited by the new bankruptcy laws)).

Tenants by the Entireties (TE) (better than nothing in the handful of states that allow it)

Qualified Personal Residence Trust (QPRT) (A decent estate planning tool, but not very practical for asset protection planning (and a tip-off that the advisor recommending it is not well versed in asset protection planning))

LLCs and FLPs (not very useful)

Equity Stripping/Harvesting (this is a terrific protection and financial planning tool (for the “right” client) especially when coupled with the 1% CFA mortgage)

Intentionally Defective Grantor Trust (a nice tool for many and a topic few are familiar with)

If you would like help protecting your personal residence, please contact a “Rated” advisors who can help fit the best plan for your particular situation.