If you own property, it is a good idea to consider filing a homestead declaration for your primary residence. The process and protections offered are different depending on the state that your property is in; however, there are several commonalities between states. All states offer the ability to file a homestead declaration and offer some level of protection.
What is a homestead declaration?
A homestead declaration is a legal document that demarcates a particular dwelling as the owner's primary residence. Again, depending on the state that you are filing your homestead declaration in, there may be separate requirements for what that state considers a homestead. For instance, in the state of Nevada, an individual may declare a condo, a mobile home (no matter if the owner owns the land the mobile home sits on or not), or land with a dwelling house and appurtenances as a homestead.
Why would I want to file a homestead declaration?
The main benefit to a homestead declaration is that it will help protect your primary dwelling against creditors. In the event that you must declare bankruptcy or the IRS puts an involuntary lien against your property or as a result of certain lawsuits, you may find that you could lose your home.
Filing a homestead declaration offers a modicum of protection against this. A homestead declaration protects a certain amount of equity in your home depending on your status. For example, in the State of California, a homestead declaration may protect up to $50,000 in equity for a single person. A married couple will enjoy $75,000 of protection. If you are over age 65 or have a disability, a homestead declaration in California will protect up to $150,000 in equity.
How does the homestead declaration protect my home?
As previously stated, in the majority of judgments a court may hold against you, a homestead declaration will protect up to a predetermined amount of equity in your home. In the event that the amount of equity you have in your home is lower than this predetermined amount, then the courts will not order you to sell off your home for the purpose of settling a judgment.
However, there are some exceptions to this. For instance, in Nevada, a homestead declaration will not protect an order to sell your property for the purpose of paying a judgment on taxes, loan arrangements for refinancing or improving your property or mechanics liens. In some states, a homestead declaration will also not protect against judgments for child support or spousal support.
When should I file a homestead declaration?
It is a good idea to file a homestead declaration as soon as you purchase a home and take its title. If you are currently financially overextended and have not yet filed a homestead declaration, it is important to get professional advice on your particular situation. It is highly likely that your primary residence will be one of the most expensive things you will ever buy.
Contact us today at AmeriEstate to learn more about homestead declarations so you can help protect your investment.