We talk all the time here on the Royal Legal Solutions blog about the importance of legally protecting your real estate investments. Far less online material is devoted to the asset protection of personal residences. Those investors who are newer to asset protection may be wondering what, if anything, we can do for our homes.
I can hear some of the more seasoned investors shouting at their computers now: “But there’s the homestead exemption!” Great point. The reality is that your homestead exemption is only as good as the state you live in, meaning it’s not universally useful. It is also only one of the top four tools that you can use to defend your personal property.
The HELOC is a relatively easy-to-obtain loan that is secured by the equity in your home. In other words, it’s a harmless type of debt. The application and qualification process is straightforward. Using a HELOC is a tried-and-true tactic for making a residential asset unappealing to pursue in a lawsuit. Creditors, too, will often back off when they see the home’s equity is securing a debt. Fortunately for you, the property looks less attractive to creditors the moment any type of debt is associated with it.
These estate planning tools are a lesser-known type of trust originally designed to minimize gift and estate taxes, though they also offer certain protections. These trusts work through provisions allowing an investor to continue occupying the home for a specified period of time, after which the residence will become the property of his or her heirs. This method has the added benefit of keeping the value of the home out of the taxable portion of your estate.
Just because homestead exemptions are not all created equally does not mean they are worthless. There is no reason that you shouldn’t do what you can to maximize your homestead exemption. If you aren’t sure where to begin, consider checking with a qualified CPA that has real estate knowledge. That CPA may be aware of deductions and have other ideas for minimizing your taxes as well.
If you have concerns about protecting your personal or business assets from lawsuits, know that you don’t have to. The asset protection pros at Royal Legal Solutions are here to help you figure out the best plans for your needs, as we have for so many other investors around the country. Take a step towards more security by scheduling your personalized consultation now.
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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