Our home is one of the most valuable assets that we own. After all, if you’ve lived in a house for more than ten years and made it look the way you always wanted to, a lawsuit is the last thing you want to happen. In this article, we will outline six ways to protect your home from a lawsuit.
Fortunately, there are things that you can do to protect your home from a lawsuit. Besides looking for litigation lawyers capable of protecting your interest and your assets, you can rely on other practices to make sure that you won’t lose your home.
1. Homestead Exemption
Most states come with a statutory exemption that protects a certain amount of a person’s home value from bankruptcy or from a creditor. Basically, if a creditor comes at you with a lawsuit and forces you to sell your home, they will only get the residue that remains after the selling costs, your homestead exemption amount, and the mortgage.
2. Tenancy by the Entirety
Depending on the state you live in, you may be able to title your home–personal residence–as Tenants by the Entirety. This practice protects your home and your assets in a unique way.
Essentially, Tenants by the Entirety comes into play when one of the spouses is sued. This makes the property impossible to bifurcate or attach to a lawsuit. In short, if the husband is caught in a severe lawsuit, it wouldn’t be fair for his wife to lose the house, especially when she didn’t have anything to do with his issues.
3. Equity Stripping
This is one simple strategy but one that sounds rather complicated. Equity stripping basically implies the placing of a lien on your home with a mortgage and then removing the equity on it in by simply replacing it with a loan.
By doing so, you make your home less attractive to a creditor who may want to take your home in order to satisfy a certain judgment.
4. Domestic Asset Protection Company
With Domestic Asset Protection Company (DAPT) you simply place any of your personal residences in a certain type of trust. The catch here is that you must have the intent to keep the residence for life. There are rules that constrain what changes may be made.
On top of that, such protection companies are able to offer you better protection the longer you keep your property in that trust.
2. Low-Risk Title
There are situations when one of the two spouses may have a risk issue that comes with their business or lifestyle. By simply removing their name from the home’s title you can protect your residence.
However, given that the effectiveness of this strategy may vary from state to state, it is recommended that you consult with a lawyer beforehand.
Umbrella insurance is basically a bunch of insurances that are able to cover you and your home in certain situations. Title insurance isn’t what you are looking for here. This insurance can be either business or personal in nature and covers all of the other insurances that you carry. Umbrella insurances usually cost around $300 to $500 a year per $1 to $2 millions of coverage.
The Bottom Line
In short, we all want to protect our homes. So when it gets attacked in a lawsuit, you don’t have to surrender your rights and prepare for the big move. There are many things that you can do long before your home this happens.
This is why it is recommended that you rely on one of the ways mentioned above as soon as you think that your home may be brought as an asset in the court of law.