Overview

Protecting a family’s primary residence from creditor claims is a common goal in financial planning. “Title strategies” describe the legal ownership choices and related actions used to reduce creditor risk. These tools can be powerful, but they have limits, trade-offs, and state‑specific rules. Use this guide to understand the most common options, practical pitfalls, and next steps to evaluate a plan that fits your situation.

Key strategies and how they work

  • Tenancy by the Entirety (TBE)

  • What it is: A form of joint ownership available in many states that treats married couples as one legal unit for property ownership.

  • How it helps: In states that recognize TBE, a creditor of only one spouse generally cannot force sale or attach the property to satisfy that spouse’s individual debts.

  • Limitations: TBE is state‑law dependent and does not protect against joint debts (debts owed by both spouses), tax liens, or federal judgments in many cases.

  • Homestead Exemptions

  • What it is: A statutory protection that shields some or all of the equity in a primary residence from certain creditors.

  • How it helps: Depending on the state, homestead protection can be modest or very substantial (Florida and Texas, for example, offer strong protections for many homeowners).

  • Limitations: Rules and dollar or acreage limits vary widely by state. Homestead protection often excludes tax liens, mortgage foreclosures, and secured creditor claims. For state details, see our guide to homestead exemptions by state.

  • Authority: Consumer Financial Protection Bureau explains homestead exemptions and their role in asset protection (CFPB).

  • Trusts (Revocable vs. Irrevocable)

  • Revocable living trusts: These avoid probate and simplify estate transfers, but they do not generally shield assets from creditors while the grantor is alive because the grantor retains control. Treat revocable trusts primarily as estate‑planning—not creditor‑protection—tools.

  • Irrevocable trusts: Properly drafted and funded irrevocable trusts can provide creditor protection because the grantor gives up control and ownership. However, transfers into an irrevocable trust must be made well before creditor claims arise and must not be fraudulent transfers.

  • Important: Courts can unwind transfers intended to hinder creditors; timing and intent matter.

  • Limited Liability Companies (LLCs) and Corporations

  • What it is: Holding real estate inside an LLC or other entity separates legal title from personal ownership.

  • How it might help: If the residence is legitimately owned by the entity (often used for rental or investment properties), creditors of the individual owner may find it harder to reach the asset. Conversely, creditors of the LLC can pursue the property.

  • Key drawbacks for primary residences: Mortgage due‑on‑sale clauses may be triggered by transfers; homestead exemptions and tax benefits may be lost or complicated; and courts may look through sham transfers. Many attorneys therefore advise caution before moving a primary residence into an LLC.

  • Joint Tenancy with Right of Survivorship

  • What it is: Two or more people own the property with equal shares; on death, ownership passes automatically to the survivors.

  • Limitations: Contrary to some expectations, joint tenancy does not reliably block creditors. A creditor can attach the debtor co‑owner’s interest; in some states the attachment converts the joint tenancy into a tenancy in common, allowing a sale.

Common misconceptions and correctives

  • “Put it in a revocable trust and creditors can’t touch it.” Not true. Revocable trusts are for probate avoidance and do not usually prevent creditor claims while the grantor is alive.

  • “A quick transfer before a claim will protect the house.” A transfer made to avoid known creditors can be reversed as a fraudulent conveyance. Courts and bankruptcy trustees can unwind recent transfers and impose penalties.

  • “LLC is a universal solution for a primary home.” LLCs are commonly useful for investment properties, not primary residences. Mortgage covenants, insurance, tax consequences, and homestead rules make LLC transfers complicated.

Bankruptcy, fraudulent transfer, and timing

If you or a close family member anticipates bankruptcy or imminent creditor action, timing and transparency are critical. Bankruptcy trustees have powers to avoid transfers that occurred within statutory look‑back periods (which vary). Transferring property when you are insolvent or in the face of a pending judgment is a high risk of reversal and can lead to criminal or civil penalties. For general bankruptcy procedures and exemption mechanics see the U.S. Courts’ Bankruptcy Basics (United States Courts).

Practical checklist before changing title

  1. Identify the real threat: Is the risk malpractice liability, a business judgment, tax liens, or general unsecured debt? Different creditors have different remedies.
  2. Check your state law: Homestead exemptions, tenancy by the entirety rules, and trust recognition vary by state. Use state guides and consult local counsel.
  3. Review mortgage and insurance: Read your mortgage’s due‑on‑sale clause and review homeowner and umbrella insurance limits.
  4. Consider timing and intent: Avoid transfers made in anticipation of a known claim; place assets strategically years in advance if protection is the goal.
  5. Use the right vehicle: For probate avoidance, a revocable trust is fine. For creditor protection, consider an irrevocable trust or other entity—only with legal advice.
  6. Document everything: If transfers are legitimate (estate planning, business reorganization), keep contemporaneous records showing the legitimate purpose.

Professional tips

  • Combine tools: Title strategies are often most effective when layered with adequate liability insurance (including an umbrella policy), proper corporate formalities, and estate planning.
  • Keep business and personal assets separate: Maintain corporate records and avoid using corporate entities as personal piggy banks; commingling weakens protection.
  • Obtain a legal opinion letter for complex transfers: For large estates or contentious situations, have a qualified attorney review the plan and provide a written opinion.

State resources and internal guides

  • For detailed, state‑specific homestead rules, start with our guide: Homestead Exemptions Explained: State-by-State Differences.
  • For how homestead protections interact with asset protection plans, see Homestead Exemptions and Asset Protection.

(Internal links: “Homestead Exemptions Explained: State-by-State Differences” — https://finhelp.io/glossary/homestead-exemptions-explained-state-by-state-differences/, “Homestead Exemptions and Asset Protection” — https://finhelp.io/glossary/asset-protection-homestead-exemptions-and-your-home/)

When specific tools apply — quick scenarios

  • High malpractice risk (healthcare professionals): Tenancy by the entirety (if married and your state recognizes it) combined with high liability insurance and retirement account protection often offers the best mix.
  • Business owner with rental properties: Hold investment real estate in separate LLCs with proper insurance and corporate formalities, but leave your primary residence in personal ownership unless advised otherwise.
  • Estate transfer concerns: Use a revocable trust to simplify probate; use irrevocable trusts only after careful planning to secure creditor protection and tax outcomes.

Pitfalls that cost clients money

  • Trying to hide assets at the last minute. Courts typically unwind such attempts and may impose sanctions.
  • Ignoring mortgage covenants and insurance consequences when changing title.
  • Assuming that a single strategy (e.g., putting a house in an LLC) is sufficient without complementary measures like insurance, corporate formalities, and tax planning.

Authoritative sources & further reading

Important note on QDOTs: A QDOT is an estate‑tax instrument used when a surviving spouse is not a U.S. citizen and is intended to defer estate tax; it is not a general creditor‑protection device for a family home. (IRS guidance: Qualified Domestic Trusts.)

Next steps — how to evaluate your options

  1. Inventory liabilities and assets. Quantify likely creditor exposure and the types of claims you face.
  2. Meet with a local attorney who specializes in asset protection and real estate. Ask about TBE availability, state homestead rules, and fraudulent transfer law.
  3. Update estate documents and insurance to reflect the chosen structure.
  4. Revisit the plan annually or after major life events (divorce, business sale, litigation, large inheritance).

Professional disclaimer

This article is educational and does not constitute legal or financial advice. Title strategies interact with state law, federal bankruptcy law, tax rules, and mortgage contracts. Consult a qualified attorney and your tax advisor before changing title or transferring property.

About the author

As a financial planner with 15+ years advising families and business owners, I’ve helped clients balance creditor risk with liquidity, tax, and estate goals. Practical solutions prioritize legal compliance, adequate insurance, and clear documentation over last‑minute transfers.

Common questions recap

  • Can a trust always protect my home? No — revocable trusts generally do not; irrevocable trusts might if created and funded properly before claims arise.
  • Is an LLC safe for my home? Not automatically. LLCs are more commonly appropriate for investment properties and carry mortgage, tax, and insurance consequences.
  • Where do I start? Identify your biggest risks, check state laws, and consult experienced counsel.

If you’d like, I can recommend discussion points to bring to your attorney or a one‑page checklist to share with your advisor.