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Equity Stripping, Equity Vesting, Irrevocable Trusts: Pros/Cons

Posted on: March 15, 2017 at 6:17 am, in

In Article I on protecting the family home we discussed strategies that don’t work on protecting the personal residence: the homestead exemption, tenants by the entirety, tenancy in common, and joint tenancy. In article II we discussed the Revocable Living Trust, the Qualified Personal Residence Trust (QPRT), Limited Liability Companies (LLC), Limited Partnerships, family Limited Partnerships (FLLP), and Corporations as additional methods that don’t work. The final segment, article III we will discuss the more practical approaches to protecting the personal residence: Equity Stripping, Equity Vesting, and Irrevocable Trusts.

Equity stripping

The words sound exotic, it means to simply take out large amount of debt on an important asset or to encumber the asset secured by the underlying asset. The theory is simple; if an asset is riddled with debt, then the creditor is unlikely to bother with trying to sue the owner for the asset, thus, asset protection.

Equity vesting

Equity vesting, is the repositioning of your vested equity in your home or other commercial real estate through equity mortgage refinancing. Your borrowed cash is then used to buy wealth building cash-value life insurance to fund your tax-free retirement. The benefit is tax-free growth within an insurance company guaranteed rate of return and tax-free withdrawal through insurance policy loans.
The concept isn’t difficult. Experts like Doug Andrews, author of Missed Fortune 101, and Roccy DeFrancesco, author of The Doctor’s Wealth Preservation Guide and The Home Equity Management Guidebook, (get a free copy of this book by Google+ this page) define Home Equity Harvesting as “removing equity” from a personal residence through refinancing (or a home equity loan) where the money borrowed is placed into cash value life insurance. I know it sounds weird. Who in their right mind would want to take a loan out on their home in order to purchase life insurance? Here’s your answer: Think of life insurance as a tax free savings account. A properly structured cash value life insurance policy can grow “tax-free” (no income taxes on capital gains, interest and dividends) and be removed tax-free via policy loans, and when properly structured will distribute tax-free to heirs at the time of death. To properly structure the policy, it must be over funded with cash using the minimum allowable death benefit that will allow the client to borrow from the policy tax-free. You can read more on how to monetize your real estate by using widely accepted leverage on real estate form a well known author Roccy DeFrancesco, J.D. by getting your free book.
An example: Mr. Smith is 45 years old, married and has a home with a fair market value (FMV) today of $400,000. He has 2 children and a spouse where their combined household income is $78,000 a year. Assume the Smith’s purchased the home for $185,000 seven years ago and that the current debt on the home is $125,000. Assume the current home loan is 6.5% with mortgage payment of $935 a month.
Mr. Smith will use a home equity line of credit (not a refinance) and will remove $76,500 of equity from the home over a five year period (which creates a 50% debt to value ratio on the property).
Equity Vesting is removing equity from a home to reposition it into cash value life insurance. Therefore, Mr. Smith will access his new line of credit in the amount of $15,300 every year for five years to fund an over funded/low expense cash value life insurance policy.
It is assumed that the life insurance policy used is and equity indexed life insurance policy that has a 1% guarantee rate of return on the cash value, has its growth pegged to the S&P 500 index and locks in the gains annually. It is also assumed that the policy will return 7.5% annually (which is conservative since the S&P 500 has averaged over 11% for the last 20+ years).
Mr. Smith will retire when he is 65 years old and will withdraw money tax-free through policy loans from his cash value policy from age 66-90 (25-years). Mr. Smith would be able to take $23,000 each year for 25 years for a total amount of $575,000.
If Mr. Smith had a home where they could harvest $200,000 of equity to reposition into a cash value life insurance policy. Using the same assumptions from the above example Mr. Smith could borrow tax-free from his life insurance policy starting at age 66? $61,000 each year for 25 years for a total amount of $1,520,000.
FULL DISCLOSURE: the above Equity Vesting examples have used optimum data as an optimum example. Your particular situation will be different based on your age, your health, borrowing capacity, level of interest rates, deductibility and limitations of your interest deduction on mortgage, and other factors. Please contact us to run your numbers based on your facts. We can be reached at 508-429-0011 or contact us through the contact form using the above link (click the link at the top of the page beside the telephone icon).

Irrevocable Trusts

While equity vesting is not for everyone, the personal residence is best suited for an irrevocable trust with an independent Trustee. A simple “revocable” trust, also sometimes referred to as a land trust, will not protect your home from potential lawsuits, divorce, Medicaid/Nursing home. You must “divorce” yourself from owning your personal residence or for any other valuable asset you wish to transfer to your irrevocable trust. As in a typical divorce decree spelling out the terms of settlement, so too your Trust Agreement must spell out the terms and conditions of the Grantor (the owner) relinquishing his ownership to the Trustee for the benefit of the Grantor and his heirs. The Trustee cannot be the Grantor, his spouse, his children, or any one related to the original owner by blood or marriage. The Trustee “must be independent” and must act independently in decisions and actions. The independent Trustee’s sole fiduciary duty is to protect the assets transferred at all costs and must grow the assets in order to fund future expectations of the Beneficiaries.
To learn more about repositioning assets for wealth building, implementation of precise asset protection systems, tax minimization strategies, elimination of the probate process, and elimination of the only voluntary estate tax system, and tax efficient transfers to your next generation email us.
Rocco Beatrice, CPA, MST, MBA, CWPP, CAPP, MMB – Managing Director, Estate Street Partners, LLC. Mr. Beatrice is an “AA” asset protection, Trust, and estate planning expert.

Tenancy in Common & Joint Tenancy: Pros & Cons

Posted on: March 15, 2017 at 6:16 am, in

Tenancy in common

Don’t use this method as an asset protection device to hold your personal residence. Each spouse has a separate, but, undivided interest in the property. Each owner of property held as Tenants in Common owns an “undivided interest” in the property by a separate deed. For example, three people (all with separate families) own a vacation home as 1/3 owner, each Tenant has VESTED OWNERSHIP by his own deed/title to his share.
What’s wrong with tenancy in common:
Each tenant in common interest is an asset of each co-owner and is subject to each of his/her co-owner creditors. That’s simply too much risk, not only do you have to worry about your creditors, you have to worry about each of you co-owners creditors.
Interest in the property may be transferred by will. The ownership interest of a tenant in common is transferable. Unlike a joint tenancy, if a tenant in common dies, the interest in the property would pass to the heirs like all other asset or personal property.
All tenants have equal right to possession. The main problem with Tenants In Common is that the other tenant(s) can do whatever he/she wants with his/her interest. Like what? One tenant-in-common (T.C.) could take out a loan on his/her interest in the property. Additionally, the T.C. interest owned by one owner is subject to that owner’s creditors. So, if T.C. named John, owns a 1/2 interest in a $500,000 vacation condo as T.C. with his brother Frank, John’s 1/2 interest can be taken from him in a lawsuit or normal negligence case. There is no protection of that interest.
Summary of Tenancy in Common: Don’t use it. Tenancy in Common is NOT an asset protection device. The risk of separate ownership is the risk. You have no control over the final outcome. In cases where there are multiple owners, it’s difficult to have a consensus opinion acting as one without the risk of diverse opinions.

Joint tenants

Don’t use this as an asset protection device for your personal residence. Joint Tenancy (JT) is also known as Joint Tenancy with right of survivorship, is the most common method of holding title to real estate, bank accounts, broker accounts, and other assets. The problem here is that each spouse can wipe out the other, i.e. by withdrawing all of your joint money out of the bank account.
In PLAIN ENGLISH, owning property as a J.T. allows each J.T., each person the same equal rights of legal enjoyment, such as:
The right to use the “whole” property (with land, the right to occupy the entire property, with stocks or bank account money, or any other liquid investment, the right to “spend the whole amount, without prior permission.” Hello!, divorce?
The right to transfer the interest in the property “without asking permission” of the other co-owners.
A survival right, such as when a joint tenant dies, the share of the deceased tenant “automatically becomes that of the other co-owners.” Normally between married couples this is not a bad thing but owning other real estate with a joint tenant such as a vacation home is not a good idea because the other joint tenant’s family will receive title to the property.

Why is joint tenancy used? Simple: It avoids probate.

That sounds wonderful. So why shouldn’t we consider joint tenancy?
Joint Tenancy is uncontrollable. If one Joint Tenant sells his portion of the asset you have no power to sever your portion of the asset. You’re stuck with the new Joint Tenant.
Possible exposure of the assets to the creditor of the other Tenants. This is dangerously significant because any Tenant can transfer the asset (the whole asset) to someone/anyone without permission from any of the Joint Tenants. An example: your co-owner get sued by a business partner and gets a judgment against him, there are two options, one is that the creditor can ask the court to sell the asset to satisfy his claim of which you have no say in the matter, or you get the creditor to become your new co-owner. The bottom line is that Joint Tenancy is subject to the creditors of each co-owner.
Title in Joint Tenancy supercedes any provisions of a will. Joint Tenancy disinherits all other heirs, except the remaining Joint Tenant. This arises most often when a parent is trying to avoid probate and estate taxes on a piece of property and wants to give an equal share in the property to the children. The Joint Tenancy will supersede any provisions of the will.
Loss of estate tax protection.
Loss of step-up in basis upon the death of the first Tenant. You bought the house for $100,000 some years later the cost basis is still $100,000 there’s no step-up in basis at the time of death to restructure the tax consequences.
Possibility of a gift tax consequence may result from the transfer of property into Joint Tenancy.
Joint Tenancy supercedes any trust with the loss of all trust benefits.
Summary on Joint Tenancy: don’t use Joint Tenancy as an Asset Protection device. Although most married couples use this method of holding property as joint tenants, it’s not the best way to hold the marital property.
In subsequent articles we will discuss holding title by a Personal Residence Trust, Revocable Trusts, Irrevocable Trusts, Limited Liability Companies, and Corporations , and equity stripping as a way to hold the marital personal residence
Rocco Beatrice, CPA, MST, MBA, CWPP, CAPP, MMB – Managing Director, Estate Street Partners, LLC. Mr. Beatrice is an “AA” asset protection, Trust, and estate planning expert.

Re-Starting Business After Bankruptcy

Posted on: March 15, 2017 at 6:16 am, in

Nobody wants to declare bankruptcy, but often the best course of action is to wipe the slate clean and start over. If you have already declared bankruptcy and are either waiting for your debts to be forgiven or if they have already been forgiven there is no need to sit idle. You started your own business and you are still the same entrepreneur[v3] . Bankruptcy may bruise your pride, but it can’t take away your business acumen, knowledge, and expertise. Most importantly, bankruptcy should never take away your drive. A business person can get started again in a “protected mode” so that you don’t find yourself in the same situation again. Here’s how.
When you file for bankruptcy, the court takes a snapshot of your assets and may liquidate all non-exempt assets to pay your creditors. This snapshot is the key to success going forward. Bankruptcy may be able to liquidate your assets at the time of the snapshot, but not your assets going forward. It is possible to help you restart your business in the safety of an irrevocable trust.
More specifically, Estate Street Partners specializes in using irrevocable trusts to separate your personal assets from your business assets and your old business debt from your new business profits. Using our methods, you can start fresh and use what you learned from your old business to be successful in your new one without the old business problems lingering to affect your new business success.
Irrevocable trusts are a way for you to work and grow your new business yet insulate it by not owning it. The UltraTrust® is a comprehensive trust document challenged and upheld in dozens of courts (including bankruptcy courts), to safeguard your new business. The irrevocable trust owns your business and is managed by an independent trustee. You can still manage your business, write checks, make business decisions and pay yourself if you choose, all within the safe confines of the trust. This insulates the business from you personally, so that you are free to take chances and grow your new business without putting your personal assets in jeopardy.
Not only does this arrangement protect your personal assets from lawsuits and other potential pitfalls within your business, it also protects your business from lawsuits levied against you personally. For example, if someone should fall on your property causing an injury, the party could sue you personally, but since you don’t own your new business, they have no standing to attempt to collect assets from the business.
If the plaintiff’s lawyer searches for your assets and determines that you don’t have enough to cover his litigation costs (because you don’t “own” the business). He may refuse to take the case on a contingency basis and ask that the plaintiff pay upfront. Having to pay upfront dramatically reduces the chances that you will be sued especially if the lawsuit is frivolous in nature. Additionally, it is possible to draft an UltraTrust® to separate your house, your bank accounts or any other asset you choose to further insulate one from the other in the event of frivolous litigation.
This configuration also insulates your business should it fall on hard times. With your new business in an UltraTrust®, if the economy should take another turn for the worse causing the business to fail, the business would file for bankruptcy, not you personally; even if you have personally guaranteed the loan.
How does this help you? The bankruptcy court could only liquidate assets within that particular trust, because the trust owns it, but does not own your personal assets. Basically you have compartmentalized your assets into different shoeboxes and anyone trying to collect can only collect from one shoebox while the rest of your shoeboxes are safe in the closet.
We haven’t even mentioned estate planning yet. With your new business starting in an UltraTrust® you qualify for Medicaid and you can avoid probate and estate taxes when you pass it on. How does that work? When the new business is in the trust, you do not own it.
This means that there are no assets in your personal name to probate, pay for the nursing home, or no estate in your name to tax. Since the trust has beneficiaries that you name when you set it up, such as your children, the assets go directly to them tax-free when you are ready to pass them on.
With Estate Street Partners and the UltraTrust® you can start your life over again. You can restart your business without having to worry about the old business and the old bankruptcy debt. You can protect that business from personal lawsuits and protect your personal assets from business bankruptcy and business lawsuits.
You can avoid probate and the estate tax when you pass your business to your children. You can discourage frivolous lawsuits even before they start. Estate Street Partners has the experience, knowledge and the tried and proven UltraTrust® trust documents to get you started again.

Homestead Exemption by State

Posted on: March 15, 2017 at 6:12 am, in

Our experience is that while there are rules and laws in place to deal with bankruptcy, Federal Bankruptcy Judges often interpret the law differently or do not apply laws on a consistent basis. They appear to err on the side of the creditor rather than the consumers. States may “opt-out” of the Federal Bankruptcy general protection and the new Federal Bankruptcy Act of 2005 makes it even more complex. Only the main residence is generally protected, second homes, vacation homes are not protected, residency is also an issue if you live part of the time in multiple states. Federal tax liens are not protected by state homestead exemptions. In states where you have unlimited homestead be careful not to fall in the trap of using the state’s unlimited exemption as your defense. The states would be committing a crime if they aided and abetted a criminal intent. Under the Uniform Fraudulent Transfer Act you would be committing a crime, see Section 19.40.041
…(a) a transfer made or obligation incurred by a debtor is fraudulent as to a creditor whether the creditor’s claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation: (1) with actual intent to hinder, delay, or defraud any creditor of the debtor.”…
Homesteading is useless in most situations for example it does not apply to Medicaid, Probate, or the Estate Tax. ALL assets titled in your name, real estate, cash, CD’s,…is subject to MEDICAID CONFISCATION for the purpose of “Medicaid” or “Medicaid Estate Recovery” (Federal Medicaid Act 42 USC ss 1396 et seq. and successor legislation(s) and other federal and state “enabling acts” and their successor acts), immediately upon entering a nursing home, or the filing of an application for Medicaid eligibility.
(Click here to learn more about the pro’s and con’s of Homestead Protection)
DISCLAIMER: This statement is required by IRS regulations (31 CFR Part 10, §10.35): Circular 230 disclaimer: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.
DISCLAIMER 2: Laws are dynamic. You need to check with your attorney in your state, before relying on the chart below. We have attempted to provide you with information we believe to be reliable but you should not rely on our information for your state because laws are dynamic and can be changed by any judge using his discretion by setting new precedence or even striking down legislative intent.

Jurisdiction Homestead Exemption and Statute
Federal Bankruptcy Exemptions $20,200 — 11 U.S.C. § 522(d)(1)
Alabama Homestead $5,000 / $10,000 — Ala. Code § 6-10-2, 27-14-29
Alaska Homestead $67,500 — Alaska Stat. § 09.38.010
Arizona Homestead $150,000 — Ariz. Rev. Stat. § 33-1101A
Arkansas Homestead Unlimited for married and head-of-household residents (but once homestead attaches, not destroyed by death, divorce, or dependents’ emancipation) — Ark. Const. art. 4
California Homestead $50,000 single / $75,000 head of household / $150,000 over 65 or disabled. — Cal. Civ. Proc. Code § 704.730
Colorado Homestead $45,000 — Colo. Rev. Stat. § 38-41-201
Connecticut Homestead $75,000 — Conn. Gen. Stat. § 52-352b(t)
Delaware Homestead $50,000 — 10 Del Code Ann. § 4914(c)(1)
District of Columbia Homestead Unlimited — D.C. Code § 15-501(a)(14)
Florida Homestead Unlimited for 160 acres rural or 1/2 acre urban. — Fla. Stat. Ann. §§ 222.01, 222.02, Fla. Const. Art. X, § 4.
Georgia Homestead $10,000 single / $20,000 married — Georgia Code Ann. § 44-13-100(a)(1). Note: S.B. 133, which would raise the exemption to $50,000 / $100,000, was reported favorably by the Senate Judiciary Committee on 3/1/07
Hawaii Homestead $20,000 / $30,000 for head of household or over 65. — Hawaii Rev. Stat. § 651-92(a)
Idaho Homestead $100,000 — Idaho Code § 50-1003
Illinois Homestead $15,000 — I.L.C.S. §§ 5/12-901; 5/12-906
Indiana Homestead $15,000 — Ind. Code Ann. § 34-55-10-2(b)(1)
Iowa Homestead Unlimited for 40 acres rural, 1/2 acre urban. — Iowa Code Ann. § 561.16
Kansas Homestead Unlimited for 160 acres rural or 1 acre urban. — Kan. Stat. Ann. § 60-2301
Kentucky Homestead $5,000 — Ky. Rev. Stat. Ann. § 427.060
Louisiana Homestead $25,000 — La. Rev. Stat. Ann. § 20:1. La. Const. Art. 12:9
Maine Homestead $35,000 / $70,000 if minor dependents. — 14 Me. Rev. Stat. Ann. § 4422(1)
Maryland Homestead None
Massachusetts Homestead $500,000 and $500,000 for each age 62+ or disabled person. — Mass. Gen. L. Ch. 188 §§ 1, 1A
Michigan Homestead $30,000 / $45,000 if 65+ or disabled. — Mich. Comp. Laws Ann. § 600.5451(n)
Minnesota Homestead Up to 160 acres. $750,000 rural; $300,000 urban. Minn. Rev. Stat. Ann. § 510.01.
Mississippi Homestead $75,000 for 160 acres. — Miss. Code Ann. § 85-3-21
Missouri Homestead $15,000. — Mo. Ann. Stat. § 513.475
Montana Homestead $100,000 — Mont. Code Ann. § 70-32-104
Nebraska Homestead $12,500, limited to head of household. — Neb. Rev. Stat. §§ 40-101 to -108
Nevada Homestead $350,000 — Nev. Rev. Stat. § 21.090(1)(l)
New Hampshire Homestead $100,000 — N.H. Code Ann. § 480:1
New Jersey Homestead None
New Mexico Homestead $60,000 — N.M. Stat. Ann. § 42-10-9
New York Homestead $50,000 — N.Y. Civ. Prac. L. and R. § 5206(a)
North Carolina Homestead $18,500 / $37,500 married — N.C. Gen. Stat. § 1C-1601(a)(1)
North Dakota Homestead $80,000 — N.D. Cent. Code §§ 47-18-01, 28-22-02(7)
Ohio Homestead $5,000 — Ohio Rev. Code Ann. § 2329.66(A)(1)
Oklahoma Homestead Unlimited for 160 acres rural, 1 acre urban. — 31 Okla. St. Ann. § 2
Oregon Homestead $39,600 — Or. Rev. Stat § 18.395
Pennsylvania Homestead None
Rhode Island Homestead $300,000 — R.I. Gen. Laws § 9-26-4.1
South Carolina Homestead $50,000 per owner; $100,000 maximum (adjusted for inflation each July starting July 2007) S.C. Code Ann. § 15-41-30(1
South Dakota Homestead Unlimited for 160 acres rural, 1 acre urban — S.D. Cod. Laws § 43-45-3
Tennessee Homestead $7,500 unmarried / $12,500 unmarried 62+ / $20,000 married and one spouse 62+ / $25,000 married and both spouses 62+. — Tenn. Code Ann. § 26-2-301
Texas Homestead Unlimited for 100 acres rural (single) / 200 acres rural (family), 1 acre urban. — Tex. Const. Art. XVI, §§ 50, 51; Tex. Prop. Code §§ 41.001 to 002
Utah Homestead $20,000 / $40,000 married — Utah Code Ann. § 78-23-3
Vermont Homestead $75,000 — 12 Vt. Stat. Ann. § 2740(19)(D)
Virginia Homestead $5,000 — Va. Code Ann. § 34-4
Washington Homestead $125,000 — Wash. Rev. Code § 6.13.030
West Virginia Homestead $25,000 — W. Va. Code § 38-10-4(a)
Wisconsin Homestead $40,000 — Wisc. Stat. § 815.20
Wyoming Homestead $20,000 — Wy. Stat. Ann. § 1-20-101

Homesteading Your Home: Pro’s and Con’s

Posted on: March 15, 2017 at 6:12 am, in

FWhen you purchased your home, your lawyer probably had you sign a homestead form along with the hundreds of other pieces of paper that were stacked in front of you. If your lawyer did explain it to you, he probably just told you that it would protect your home should you have a debt. Although declaring your homestead may offer some minimal level of protection, homestead laws vary dramatically from state-to-state in the protection they provide from unsecured creditors. Protection can vary from “none” to “unlimited” protection.
The theory of homesteading is to protect “your homestead amount (equity amount)” on your primary residence from a forced sale for the benefit of unsecured creditors. Homestead applies only to your primary residence and only to the person claiming the homestead who must file a state prescribed form in the same registry of deeds where your primary residence deed is recorded.

There are restrictions to the homesteading protection:

  1. It’s limited to the Federal Bankruptcy amount of $20,000 (11 U.S.C. § 522(d)(1)) and further complicated by the amended Federal Bankruptcy Act of 2005.
  2. Homestead does not apply to Medicaid protection or state enabling confiscation acts under Medicaid.
  3. Homestead does not avoid probate or estate taxes.
  4. Homestead does not deter your bank from foreclosing if one does not pay the mortgage.
  5. Some states “opt out” of Federal Bankruptcy protection.
  6. Homesteading only applies to your primary residence, not to your rental unit, or vacation home. So, if you live in Florida part-time (up to 6 months) you forfeit your homestead protection, and in some states the part-time number of days is cumulative from year to year.
  7. The homestead designation applies only to the declarant and in some states your spouse and/or children in their minority years. The homestead designation does not apply to a surviving spouse if remarried.
  8. The homestead designation terminates on sale or transfer, or if your property ceases to be your principal residence.
  9. There is no homestead protection in states like: Maryland, New Jersey, and Pennsylvania.
  10. States like Arkansas, Florida, Iowa, Kansas, Minnesota, Oklahoma, South Dakota, and Texas have no significant value limit on the protection.
  11. Other states like Alabama, Kentucky, Ohio, and Virginia have only $5,000 in protection.

Is it worth the filing fee?

In Arkansas, Florida, Iowa, Kansas, Minnesota, Oklahoma, South Dakota, and Texas, the answer is yes, but… Just remember that homesteads can and will be challenged if you are abusing the objective of your state’s homestead act. If you are being actively sued, or you are expecting a potential lawsuit (you know it’s coming) and you sell your real estate then move to Florida for the purpose of availing yourself of the unlimited homestead, you will not succeed because your transfer is fraudulent. The state of Florida is not going to aid and abet a criminal event. In Havoco of America, LTD., v. HILL No. SC99-98. Supreme Court of Florida. (2001), Mr. Hill bought a new home. The problem being that several years before, Havoco of America had brought a suit against him. Mr. Hill attempted to declare his house a homestead, but even ten years later when the suit was settled, the court reasoned that Mr. Hill was attempting to avoid paying his debts. The court ruled that Mr. Hill’s home was not protected by the homestead declaration.
Not only can transfers be found to be fraudulent, sometimes homesteads can be confiscated. In the case of Butterworth v. Caggiano, 605 So.2d 56 (Fla.1992), Caggiano was convicted of racketeering charges. The state sought civil forfeiture of his home. The court found for the state stating that Caggiano racketeered in the house and that the homestead law did not apply to criminal acts committed using the property.
Bankruptcy laws are not going to be of any help when you knowingly intentionally try to become insolvent to hinder a creditor. Under the Uniform Fraudulent Transfer Act you would be committing a crime, see Section 19.40.041
…(a) a transfer made or obligation incurred by a debtor is fraudulent as to a creditor whether the creditor’s claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation: (1) with actual intent to hinder, delay, or defraud any creditor of the debtor.”…
Homestead also can only protect one property at a time. If you have more than one property you cannot protect all of them. In the England v. Federal Deposit Insurance Corporation, No. 91-7381 U.S. Court of Appeals, 5th Cir. (1992) England and his wife sold their home, filed for bankruptcy and then purchased a new home. England attempted to be creative and claim the money from the sale of the first home as a homestead exemption linked to the first home and then claim the second home as a homestead. The court found that this would be two homesteads which is prohibited by the Texas state laws. Because of this, the court ruled that the proceeds from the first residence were not protected by homestead exemption, but the second home was.

What’s the better way?

Creating a “third party owner” such as an UltraTrust® Irrevocable Trust for your primary residence and all your other valuable assets is better than any homestead even in states with unlimited homestead. A third party owner is anyone not related to you by blood or marriage. This independent person or legal entity has no underlying linking or subservient relationship to you, your spouse, or your blood relatives but has a “fiduciary” relationship.
What is a fiduciary relationship? The word fiduciary comes from the Latin word fiduciarius, fides (faith), in fiducia (in trust), meaning holding in good faith and trust. A written legal relationship created between two or more parties entrusting “in good faith” acts and deeds created by a contract is a Trust Agreement.
A well written Irrevocable Trust Agreement between the Grantor (guy with the assets) and an Independent Fiduciary Trustee (guy who watches over your assets for safe keeping) for the benefit of your Beneficiaries (you, wife, children, grandchildren, girlfriend, and/or anyone you wish) is significantly better than any homestead even in states with unlimited homestead. Period.
A fiduciary duty imposed on your Independent Trustee is the highest standard of care within the law. A fiduciary is legally expected to give extreme loyalty to the person to whom he pledged his loyalty to the point of defending, even with his own funds if necessary. The fiduciary is contractually obliged to defend your assets to the farthest extent of the law. If they fail to do so, they may be responsible for any assets lost. The Ultra Trust® is a contract that contains just such language.

1,000% better than homesteading is the Ultra Trust® Irrevocable Trust

The Ultra Trust® Irrevocable Trust is part of one of the strongest asset protection strategies for business owners ( that is specifically designed to give you a high level of protection. In order to grow with your changing needs, your new financial goals and cover every possible life event (getting married, having a new born or adopted child, divorce, death, etc) the Ultra Trust® is designed as a sophisticated, yet fluid document. In fact, the document’s length usually falls between 35 to 45 pages, so you know that it is sophisticated enough to protect your assets while flexible enough to grow with your changing needs. Speaking of protecting your assets, the Ultra Trust® has successfully withstood attacks from your largest creditors: the IRS, Attorney Generals, the Justice Department, banks, and common creditors like yours, so you know that your planning will work regardless of who dares to challenge your asset protection planning.
When you follow our instructions in a timely manner, your estate plan will virtually eliminate your risks and problems. We have a 100% success rate with clients using our strategies over the last 30 years. Our clients range from high profile individuals to local businessmen and from clients of moderate to extreme wealth.
Our Ultra Trust® is dynamic to the ever changing laws and tax legislation. We recently modified or Ultra Trust® language to cover the last far reaching legislation: the Federal Medicaid Act 42 USC ss 1396 et seq. and successor legislation as well as other federal and state enabling acts and their successor acts which require the spend-down of your wealth down to your last $2,000 to qualify for Medicaid. (State enabling acts means the recovery of Medicaid expenses by leaning or suing your heirs.)

Our Ultra Trust® will:

  1. Eliminate the need of Homesteading and avoid its shortcomings.
  2. Reduce the risk of, if not completely eliminate, frivolous lawsuits.
  3. Avoid fraudulent conveyance and civil conspiracy claims by your past, present, and not yet born creditors.
  4. Eliminate probate, which is triggered by the possession of assets on date of your death.
  5. Eliminate estate taxes. Estate taxes are the only voluntary tax in the entire IRS code. These potentially high taxes are based on what you own (titled in your name) on the date of your death.
  6. Eliminate Medicaid and State Medicaid Enabling Acts.
Furthermore, we create checks and balances that you are not going to find elsewhere such as a Trust Protector to oversee the Trustee for your protection.
If you “own nothing” (but still enjoy life the same as you are now) you will eliminate many complexities of ownership. Ironically, the only guaranteed success and protection is to own nothing. The only legal means of owning nothing is through an Irrevocable Trust with an Independent Trustee. Our Ultra Trust® goes beyond your expectations, with the added security of a Trust Protector.
Workflow of the UltraTrust irrevocable trust plan