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California’s homestead exemption is now more generous

On Behalf of | Oct 25, 2021 | Estate Planning

When this blog writes about estate planning, we often talk about trusts and various estate planning instruments. However, part of solid estate plan includes what to do with one’s home, and here in California, our state’s new generous homestead exemption must be considered.

The 2021 increase

This year, our state increased the homestead exemption and declaration significantly. Prior to this year, depending on one’s individual circumstances, the homestead exemption could have been as high as $175,000 or as low as $75,000. Now, though, the exemption amount is now between $300,000 and $600,000. And, now, California will tag the exemption amount to the inflation rate, which will be determined by the median sale price of a single-family home across the country, not just our state.

Why does it matter?

These exemptions protect the homeowner’s equity against unsecured creditors. This is true, even if they obtain a judgment and attempt to put a lien against the home. A key distinction too is that the exemptions still apply when there is a mortgage on the property or even if they are in a living trust. And, one’s dwelling can be a traditional home, but it can also be a mobile home, boat or trailer.

How does it protect against a judgment?

When a creditor attempts to execute a judgement, they will want to initiate a judicial sale on one’s largest asset, usually their home. However, that judicial sale is not allowed unless the value (i.e., the amount one could reasonably receive at auction) exceeds to homestead exemption amount plus the outstanding encumbrances and liens that are filed against that property. Plus, if a sale is allowed to move forward, the homestead exemption portion of the sale must be set aside and held for up to six months after the moment the funds have been received to let the homeowner buy a new home.

What does one have to do to get the exemption?

For our Torrance, California, readers, it is automatic on their principal dwelling. But, to get the full protection, one will need to file a declaration of homestead with their county tax assessor’s office. This declaration is a notarized and sworn, and it will protect that exemption amount from a voluntary sale.


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