The Benefits of Homestead Exemptions

If your state has homestead protections, never put it into an LLC. But you may put it into a trust for estate planning purposes. Every state that has homestead protections will allow a different amount for what they consider to be the exemption — that means the amount that people can’t come after or you’re out.

 

 

Now consider the amount of homestead. If your homestead exemption is here (high) and your house is here (low), well it makes sense to pay off your entire house because we know all of that money is going to be protected from a lawsuit because the exemption tells us that nobody can get to it. If your house value is here (high) and your homestead is here (low) then what we want to do is create a lien against the property to cover that gap so it makes it look like the property is more encumbered than it might otherwise be. 

We talked about that in another video about the ways we might cover that property, whether using a home equity line of credit and another bank loan or establishing our own mortgage company to be able to loan against that. 

So always know what your homestead protections are, never transfer them to LLC, but you may do so to a trust for estate lending purposes.

Scott Royal Smith is an asset protection attorney and long-time real estate investor. He's on a mission to help fellow investors free their time, protect their assets, and create lasting wealth.

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