In our last blog post in this series, we examined the different ways you can try to protect your wealth and assets. Specifically, we learned about the strength of exemptions, which are your rights protected under the law, compared to the relative weakness of other types of limited protections in the form of entities such as LLCs and trusts, which can still be attacked by creditors and dissolved by the courts. In today’s post, let’s take a closer look at differences in exemptions available in California compared to other states.
Each state legislature has passed a variety of different exemptions which, if claimed, protect certain assets to varying degrees. For example, if you purchase a home in Florida and claim the “homestead exemption” then it is fully protected, regardless of its value. Texas has a similar unlimited homestead exemption, while California’s homestead exemption is limited to $75,000 if you are single or $100,000 if you are married. Other types of assets and sources of income, such as 401(k)’s, life insurance policies, annuities, and wages, are exempted to different extents in different states. For a comprehensive state by state comparison, you can visit www.legalconsumer.com, but here’s the general gist: when you’re looking to protect your wealth and assets by claiming powerful exemptions, some states appear to have stronger and broader protections available than others.
But, although some of California’s exemptions might appear limited or less attractive when compared to other states, there is one particular exemption that is exclusive to California, and when you look deeper you find that it is surprisingly powerful. This unique exemption is called the State Private Retirement Plan; it was passed by the California legislation in 1970, and has been upheld in courts for years. Using a well-crafted State Private Retirement Plan, you can protect by exemption the equity of your home, investment real estate, stocks, and more! We’ll learn more about the State Private Retirement Plan later in this blog series, but for now, the take-away is that this is an exclusive, broad, and powerful exemption available only in California.
Stay tuned for our next post, where we’ll start learning about some of the biggest mistakes that are made in asset protection.
Scott, R. K. (2017). California asset protection guide: The NON-legalese California business owner’s & professional’s guide to asset protection & tax planning. Retrieved from https://app.luminpdf.com/viewer/ne6hiAMBas6o4tzmZ