In this episode of Coffee with Carl, attorney Carl Zoellner covers the basics of the homestead exemption for your personal residence.
Updated August 7, 2020
At our Tax & Asset Protection Workshop, we briefly talk about the homestead exemption. This is a question I receive commonly from Platinum clients. So, let’s break this down.
Ultimately, the homestead exemption is a creature of state law. Thus, the nature of the exemption varies from state to state. However, in general, exemptions for your personal residence exist to protect the equity in your home.
Some states have unlimited homestead exemption. This means that all of the equity in your home is exempt from the reach of creditors and judgments. The two most well-known states with unlimited homestead exemption are Texas and Florida. What this means is that, if you own a $10 million home free and clear in Texas and there’s a judgment against you, every cent of that $10 million would be protected.
Unfortunately, most states don’t offer this benefit. For instance, in California, only $75,000 of your personal residence is exempt.
On the other hand, even if the value of the exemption is low in some states, there are usually tax benefits that go along with claiming it. Thus, it’s important to look at the individual state when structuring your business entities.
Also, it’s important to keep in mind that, in almost every scenario, the homestead exemption will not provide protection against the property’s primary mortgage holder. Even in Texas, if your primary mortgage holder wants to foreclose, they can.
Watch as Carl explains the basics of the homestead exemption.
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