Legal Question in Real Estate Law in California

Re: Homestead Law

Not enough. Your best strategy would be to transfer a remainder interest in your home to your children or other loved ones, in proportion to how you would want the property transfered after your death. This will leave you eligible for Medicaid assistance if and when you require it and protect the equity from your creditors. Your childrens' creditors will be unable to destroy your life estate.

Re: Homestead Law

First, there are two kinds of homestead protection in California. One of them is automatic; some of your home equity is sheltered from creditors' attachment processes without your having to file anything. Then, there is the declared homestead. Generally, the added protection of a declared homestead is not very significant, and often the "red flag" effect when creditors see a fresh homestad filing is a good reason, in itself, not to bother filing.

I would, however, be cautious about the proposed alternatives. A transfer to a revocable trust may be a good estate-planning tool, but provides almost no protection against your creditors. An irrevocable trust provides more protection, but you lose control over the property, and if the transfer to the trust has the effect of making assets inaccesible to a present creditor, the transfer may be attacked as fraudulent.

Giving away property or selling for below market value may also have undesired property, gift and income tax consequences for you or your heirs.

My advice would be to have a frank discussion about your concerns and objectives with a well-qualified estate-planning attorney (which I am not) to cover the following:

(1) shelter from creditors without triggering a claim under the Uniform Fraudulent Transfer Act;

(2) Medicaid reimbursement claims issues;

(3) Minimizing taxes to yourself and your heirs, including tax-basis issues, gift taxes, and reappraisal for property tax problems; and

(4) Maintaining desired control vs. turning control over to trustees or prospective heirs.

There is a lot of potential for bad advice and bad decisions here, and home values and taxes are high in relation to what estate planners charge, so don't be penny wise and pound foolish with estate planning and asset protection.