Strategies for Safeguarding Real Estate Assets in Tacoma

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Written By Juliet D'cruz

To prevent your real estate assets from being used to settle legal disputes, it’s crucial to safeguard their importance and value. Click here to learn more about the essential approaches to shield your real estate assets from potential creditors.

Homestead Exemption:

The homestead exemption is a legal provision that allows most state homeowners to safeguard a portion of their home value from creditors or bankruptcy. A homestead is defined as the primary residence of a homeowner, including their house, condominium, or manufactured home, depending on state regulations. The amount and method of utilizing the exemption vary from state to state, but the fundamental principle remains unchanged: the equity portion outlined in the homestead exemption is protected from creditors’ efforts to force the sale of your home during a bankruptcy case.

Protecting Assets with Trusts:

One way to safeguard your assets from potential lawsuits is by transferring property into a trust. By naming the trust as the property owner instead of yourself, it can be more challenging for creditors to locate or seize your assets. Additionally, this strategy affords you added privacy. Generally, the longer your assets remain in the trust, the better protection they receive.

Domestic asset protection trusts, also known as domestic asset protection companies, are trusts based in the United States that offer protection against creditors and bankruptcy. While they are growing in popularity, they are not currently available in Washington state.

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Using Debt to Protect Property:

One way to reduce the attractiveness of your property to creditors is through equity stripping, which involves replacing equity with debt through a strategic lien on your property using a mortgage. By doing so, the cash value of your property will appear lower, reducing the likelihood that creditors will pursue it.

However, it is essential to exercise caution when considering this approach, particularly if you anticipate legal action. Simply mortgaging your property to strip equity may not hold up in court. Working with a real estate attorney or financial advisor to establish a legitimate HELOC or mortgage plan can provide you with the protection you need from creditors, giving you peace of mind if you end up in court.

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Final Thoughts:

While each approach has its own complexities, seeking guidance from a real estate attorney or financial advisor can help ensure that you utilize them correctly and to their maximum potential. By taking proactive steps to safeguard your assets, you can rest easy knowing that you have done everything possible to protect your hard-earned investments.