Three Things Everyone Should Do, But Probably Haven’t
MATTHEW W. CAMPHUIS
Castillo Harper, APC
There are three things everyone should do right away if they haven’t already (especially if you are in law enforcement): (1) record a Declaration of Homestead in the same county as your home, (2) make a trust and a will, and (3) execute power of attorney documents.
Law enforcement officers live very busy lives, so it’s understandable when they don’t get everything done that they need to, and certain important areas get put on the back burner. However, those three things are ways anyone, especially a police officer, can help proactively protect his or her home from a lawsuit before one occurs, help keep where they live more confidential and make it easier on their family should the worst occur.
1. Record a Declaration of Homestead
It’s surprising how few people have heard about recording a Declaration of Homestead, especially since making and recording them is very easy. A Declaration of Homestead is a way for a person to protect the equity in their home from creditors, such as those collecting on the debt owed from a lawsuit. It is the first thing someone should do immediately, or as soon as possible, after purchasing a home.
A Declaration of Homestead is typically a one-page document that declares that you have a legal ownership interest in your home and that you reside in that home. It protects a certain amount of equity in your home should you have to file for bankruptcy. No one wants to have to file for bankruptcy, but if you get sued, it may be your last resort to save your house from being sold to pay for a judgment against you.
Declarations of Homestead are automatic in most states, such as California, by statute, so you don’t technically have to record one to use it in a bankruptcy. However, when you do record one, it gives you additional benefits (see Cal. C.C.P. § 704.910). When you record one, it essentially creates a lien on your own property and helps you establish priority over other creditors. One benefit to recording a Declaration of Homestead before you have notice of any type of debt or claim against you is that you create a legal presumption that you should be first in line to the legal amount of equity protected in your home. In California, the amount of home equity protected currently ranges from $300,000 up to $600,000, depending on the median sales price of homes in your county. That presumption of priority can be important in contested bankruptcies or even can be used to ward off some creditors with just the threat of bankruptcy.
In California, another benefit to recording a homestead is that if the home is voluntarily sold, the traceable proceeds from the sale are exempt from creditors in the specified amount for six months from the date of sale, if they are reinvested into another home on which you subsequently declare a homestead (Cal. CCP § 704.960[a]). So, in other words, it can help you buy a new home with the proceeds from the sale of your prior home while you are going through, or shortly after, a bankruptcy.
You can only make a Declaration of Homestead if you live or reside in your home. If you are married and both spouses jointly own interests in the home, then both spouses should file a Declaration of Homestead. The most difficult part of a Declaration of Homestead is making sure the legal description to your property is accurate and the type of legal interest you own is correctly described. You may want to consult an attorney for help with drafting and recording a Declaration of Homestead. Most county recorder-assessor websites have a fillable form version of a Declaration of Homestead that you can download for free.
2. Get a Trust and Will
You have probably heard of the importance of getting a will, or maybe even a trust. But for many of us, the thought of planning for death is so uncomfortable, and such a low priority, that we never get around to doing it. “I’ll take care of that someday,” we tell ourselves. And of course, who wants to spend money on that? The problem is, no one knows when we will meet our fate and it seems to always come as a surprise. Unfortunately, if you neglect estate planning, your family and loved ones will have to clean up the legal mess you leave while grieving at the same time.
That said, here are a few reasons you shouldn’t put it off any longer.
First, it puts your affairs in order and leaves a better legacy. You don’t want your family and loved ones to feel any more stress than they have to when they lose you. They may even feel angry with you if you don’t properly arrange your affairs, because they will have to do a lot more work for you. And that isn’t the type of legacy we want to leave. We want to make it as easy as possible for them and not be a burden.
Next, you can help protect the confidentiality of where you live if you put your home into a trust. When you make a trust, it’s sort of like its own entity. You can name your trust anything you want to. Giving your trust a name that is not directly associated with your name can make it more difficult for people to discover that you are the person who owns your home when they search through the public records of the county recorder’s office. You may want to consult with a local attorney regarding whether there are any potential adverse consequences to choosing a name for your trust that doesn’t have your own name in it.
Generally speaking, most people should put their home into a trust since there tends to be less tax implications and fewer costs associated with distributing their estate on their death, if they do so. If done correctly, having a trust can help your estate avoid going through the costly probate system. There are many different types of trusts, so it may be important to consult an attorney to see what type of trust, if any, is right for you.
Do you need a will if you have a trust? Having a will can be an important backup if the trust fails for some reason — such as by not properly “funding” the trust by putting assets into it. A will is also typically the document where parents declare who will be the legal guardian of their children upon their passing or incapacity. This can be extremely important in avoiding or streamlining conservatorship lawsuits or contests regarding guardianship.
3. Make and Execute Powers of Attorney — Health and Financial
Powers of attorney in fact — not to be confused with the powers of attorney at law (which only lawyers can have) — are legal documents where you can appoint someone to represent you regarding your health or financial decisions. The person you appoint can’t represent you in court (because, again, only attorneys at law can do that). However, they could help you make health decisions and manage your financial affairs when you are unable to do so.
These documents are frequently used to help plan in advance. For example, if you get injured at work, are in a bad accident or suddenly acquire major health issues resulting in an inability to make your own decisions, these documents will let the people you choose make the decisions for you. If you don’t do it ahead of time, it could result in frustration among your loved ones because they may have to bring a costly lawsuit called a conservatorship just to help you make health-care decisions, or to help you manage your financial affairs. Many people are surprised to find out that just because someone is your spouse or family member, they are not entitled to your health information and cannot automatically make health or financial decisions for you when you can’t. It’s better to have this done ahead of time and save your loved ones the headache.
This article is intended as general information and not legal advice. Any use of the word “you” is intended to refer to persons in general and is used to help the reader more easily understand the content.
About the Author
Matthew W. Camphuis is an associate attorney at Castillo Harper, APC, where he handles employment defense, civil litigation and criminal defense matters.