Many states with the United States protect your personal residence from business related lawsuits. Learn about these laws and whether they impact you.Sign Up to Watch
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-What's up, guys. My name is Daniel McKenna. I'm the executive producer here at Thrive15, the website that trains business owners on time management tips, marketing, sales and more. Today we have Clay Clark sitting down with master attorney at law, Wes Carter. Now we're going to be talking about, what is a homestead exemption? Basically, you're going to want to know about the homestead exemption. In the event of something happening and possibly you dying, it's going to protect your spouse from creditors and property taxes and things that you definitely need to know about. Wes Carter is going to show you what the homestead exemption is all about.
If you were to watch this lesson and not get anything out or it, and not apply it to your life or your business, it's going to be meaningless. Knowledge without application is meaningless. How meaningless? More meaningless than Google searching your favorite new song that you don't know the words of, that kind of go like, nah nah nah, nah nah nah nah nah nah, nah nah nah nah nah.
-Wes Carter, how are ya?
-I'm well. How are you?
-I see you didn't know what I was going to do there.
-I was waiting.
-It's good to see you.
-You always surprise me.
-It's always an adventure.
-Well here we go. Here we go. Speaking of adventures, segway into homestead exemption. Here we go.
-You see how I transitioned there? That's a segway. I can do--
-Is that TV talk?
-Yeah, TV talk. I'll get some B roll of that in a minute as well. Now the homestead exemption-- this is a thing where a lot of people are not aware of what the homestead exemption is. But if you're a business owner and you're kind of a risk taker, I think it's important that you know what the homestead exemption is, because if you get sued or you get behind on some bills, it's nice to know about this. So we're going to get into that in just a minute.
But before we do, let's focus on the most important things here. Let's talk about some of the things that the people want to know. And so legally speaking, are you in any way, shape or form related to a one, Sarah Sanguin Carter, the Canadian actress best known for her role as Maggie on the TNT science fiction series, "Falling Skies?" Answer the question.
-I hope not.
-OK. I think we as a jury know what we've discovered here. OK. I figured you'd say that, honestly. OK, so we're moving right along here. So we're talking about how the homestead exemption. I'm going to go ahead and define it and then I'm going to get your take on. This is the definition. A homestead exemption is law to protect the value of the homes of residence from property taxes, creditors, and circumstances arising from the death of the homeowner's spouse. Laws are found in state statutes or constitutional provisions which exist in many states in the United States. Wes, what are we talking about? What is a homestead exemption?
-A homestead exemption is basically, putting a giant do not touch sign on your house that you live in as your primary residence. So creditors-- let's say you file bankruptcy because you took a chance that didn't work out, creditors can't get to your house. They can get to your other assets, they can't get to your house. Your house is always still subject to the bank that has a mortgage on it, but other creditors, guys that you took your small business loans from, your car loans, things like that. They can't get to your house.
-OK, so let's do some examples here. Let's say that I'm out there, I'm starting a big roofing company. Putting roofs all across America. I have built up about a $800,000 net worth. I own this house that's paid for cash. I've got some nice cars, paid for cash. I've got some TVs, paid for cash. I have a like a the gold-plated chandelier, paid for cash. I guess a chandelier would be up here. Chandelier, pay for cash. And then I mess up, and now I'm going into bankruptcy with my business. Can the creditors come take my gold-plated chandelier?
-Usually the homestead exemption is going to cover the building and what they call fixtures, which are things permanently attached.
-What about my car?
-The car is not covered.
-So they could take the car. The car is not exempt with the homestead exemption.
-Not with the homestead exemption.
-But the chandelier could, because the chandelier-- which you need, I mean, end times, if you're going through a rough patch, you need your gold-plated chandelier.
-What are you going to swing from?
-Right, so anything that's physically attached to the house.
-So you might not be able to get to and from your house, but you can keep your house.
-Correct. Now some states do impose a dollar limits. And if you have a $5 million mansion, all that's probably not covered.
-What? How does that work? They take half of your house?
-Well, they would probably sell the house, give you cash, and keep the rest.
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-OK, now if I'm a business owner and I have my house paid off, and I find myself getting sued, I might go-- maybe I'm watching this right. Now, maybe that's you. Maybe you have a business. Your house is paid off. And you're like, yes, I'm saved. I knew it. This homestead exemption is the best. But yet, it's not in every state.
-Not in every state, and the value, and the exact rules vary from state to state. Sometimes in the statutes, sometimes it's in the Constitution. So you need to look into what the rules are in your state. So you need to find a local attorney, or reach out to someone who can practice law in all the states.
-And, coincidentally, you can practice law in every state. Am I right?
-I do practice law in a very large number of states.
-In full disclosure, he's awesome-- just throwing that out there.
-Also, we didn't mention tax benefits.
-Oh, let's talk about it.
-If you file your homestead exemption, in a lot of cases, you can exempt or lower your property taxes on your homestead.
-Really? Really, and that's just talking to your attorney and filing that?
-Exactly, it's usually just a form we file with your county or your state and probably can save you some tax money.
-What's the most popular misconception that people have about the homestead exemption and what it really means?
-I think people-- the most common thing is when they hear homestead, they think farm or some sort of acreage. Because it's kind of an antiquated word that we use. But I just think people don't know either it's available or what is in general.
-I don't know-- you said it's antiquated, and I'm sort of offended. Because I refer to my house as the homestead. I say I'm going to go back to my homestead.
-Bringing it back Clay, bringing it Back.
-That's right I bring it back. I keep it old school. Because old school-- if you forget about old school, you can't remember where you came from. That's just something I live by.
So now, Wes, slightly off topic but if you're an entrepreneur and you do find yourself in a bad place financially, yet your home is already paid off, in every state in the union is there some sort of homestead exemption? Or is it just some states? I mean is there any states-- and I'm not asking for the specific states. But is there any states that are like, nope. Nope, you do not have a homestead exemption here.
-Most states will have some protection it's just the level protections vary. Also another important thing to point out is we're talking about your home is paid off. Something I run into quite a bit is where a business owner will be-- well, I have this home, I have this debt. Why don't I just take out another mortgage on my house to payoff this debt? Be very careful with that, like we talked about bankruptcy, things like that. Your mortgage company can foreclose on your house.
So if your house is paid off, that's your last resort. That's not something you want to dip into. Because if you're losing money that fast in your business, unless you have a really good plan to turn around quickly, you might just be throwing your house into the black hole too.
-OK, so it's very important that the homestead exemption and some action items so we can think about is one, is going to calling a local attorney to find out what the homestead exemption laws are in your state. Two, you might be able to save on your taxes by simply reaching out to your attorney and filing the homestead exemption paperwork properly.
-And three is they might be able to take your stuff-- they being creditors or if you get behind on things-- but they couldn't take your house if you qualify for the homestead exemption. So just look into it. As an entrepreneur, it's a little risky out there.
Walt Disney lost it all. It's crazy, but he lost it all basically twice. Henry Ford lost all five times. And so I mean no matter what kind of entrepreneur you are, you're going to have a little bit of a risk there. And so you really need to make sure that you're aware of how these laws work in your favor. Well, Wes I appreciate you for being here. And I just look forward to relentlessly, and diligently, and consistently, and passionately suing the heck out of you.
-It'll be fun. Thank you.
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