Palm Springs Law Blog

Wednesday, May 8, 2024

Protecting Your Home From Creditors in California

Outstanding debt can put a serious damper on your peace of mind, especially with regard to protecting your home. Fortunately, there are certain steps you can take to ensure your home is protected from creditors, both now and once ownership of the property passes on to your heirs.  

If creditors coming after your home is a point of serious concern for you, your best option is to consult an experienced estate planning attorney about which arrangements can keep your house and other assets safe going forward.

How California Creditors Can Take Your Home

In the state of California, creditors can seize your home in a number of ways. Lawsuits and foreclosures are the most common among these. Once your estate passes into probate, your creditors can seek to have your assets liquidated to pay off outstanding debt. Depending on the amount of debt, the process can easily leave your heirs with nothing left once that debt is paid off.

In many states, an asset protection trust is the preferred vehicle for keeping one’s assets safe from creditors. Unfortunately, that is not an authorized type of trust in California, so homeowners need to consider alternative estate planning options. 

California Estate Planning Options for Protecting Your Home From Creditors

Though asset protection trusts are not authorized in the state, California estate planning law still allows a few different options for managing your assets in a way that protects them from creditors. 

If you’re considering working with a lawyer to protect your California home from creditors, there are two primary options they’re likely to suggest. Which is the best option for you, though, will always depend on the specifics of your financial circumstances. 

Irrevocable Living Trust

You can place your home into an irrevocable living trust. Once assets are in this trust, you lose control over them, which means the obvious downside is that if you change your mind about your inheritors, there’s little you can do to alter things. However, an irrevocable trust can potentially protect your home from creditors so long as it is set up correctly.  

Spendthrift Trusts

The purpose of a spendthrift trust is to protect assets from beneficiaries who may have difficulty responsibly managing their money. However, a key benefit afforded by this type of trust is that it can effectively protect assets like your home from creditors. It limits your beneficiaries' access to the assets placed within it, but it can be an effective means of ensuring that your home remains in possession of those beneficiaries and is not seized by creditors.

How a California Estate Planning Lawyer Can Help

If you’re serious about protecting your home from creditors, it’s important to work with an experienced estate planning lawyer. They’ll work to review your financial situation, identify possible solutions, and help you understand the potential benefits and downsides of each option. 

Both estate planning and debt collection laws are complicated, and it’s a mistake to assume that one option is best without consulting a lawyer. For example, revocable living trusts are one of the most common options for protecting assets after death. But assets in one aren't protected from creditors, especially if your heirs face a lawsuit.  

Working with an estate planning attorney is the only way to know for sure that all potential legal implications have been considered. Without professional legal aid on your side, you might think your house is protected when, in reality, it may not be.

Our Palm Springs Estate Planning Lawyers Can Help Protect Your Home 

Heritage Legal, PC, is an estate planning law firm located in Palm Springs, California. Our experienced estate planning attorneys can work with you to review your financials and identify the type of estate planning arrangement that can keep your home safe from creditors, both now and in the future. 

Don’t let the stress of debt rob you of your peace of mind. Contact Heritage Legal today to schedule a consultation with an experienced Palm Springs estate planning attorney. A little planning can go a long way toward ensuring that you and your loved ones don’t have to worry about creditors taking your family home. 

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