Tenants by the Entirety for Asset Protection
It is often shocking to discover how vulnerable your most valuable asset is to being lost. Yet, a few simple, inexpensive asset protection steps can protect your home.
High-risk, uninsured professions require you to hold title to your marital residence in Tenants by the Entirety.
The Tenants by the Entirety form of legal title protects your marital property from lawsuits and creditors of one spouse. This legal title is exclusively available to married couples. Consequently, claims made against both spouses are not covered. Also, it is only effective for your principal place of residence. For more information on your current title and TBE deeds, you may contact me directly.
Homeowners Insurance Protection
Make sure your homeowner’s insurance policy adequately protects you from unexpected events.
Avoid Being Underinsured:
- You need enough replacement cost and extended replacement cost insurance limits to rebuild your house entirely if it is destroyed. Extended replacement cost coverage adds up to 20% over replacement cost limits if a disaster increases building material and labor costs. For example, we are seeing that now with the enormous increase in the price of lumber because of 2020 events.
- Inflation guard coverage adjusts rebuilding costs that have increased since you purchased your home.
- Ordinance or law coverage pays for the cost of rebuilding to meet new and often stricter building codes or changes in the law.
- Water backup coverage is essential if you live in Chicago and have a basement or live in a flood zone.
- Flood coverage. Standard home insurance policies do not cover damage from the flooding of a hurricane or river overflow act. However, you can obtain this coverage from the federal government’s National Flood Insurance Program, and your insurance agent or company can assist you.
- Personal Possessions coverage amount protects the replacement of all contents of your home if they are stolen or destroyed in a disaster. Therefore, you should do a periodic inventory of the actual value of all your possessions. After that, compare your inventory to the total to the coverage amount on your policy. A replacement cost policy is far better than an actual cost policy. That is to say, it pays the current cost to replace a possession instead of just reimbursing you for what you spent ten years ago or more.
- Asset protection coverage. Most homeowners policies have $100,000 in liability protection against damages you, a family member, or a pet causes to another person. Consequently, it is not enough insurance coverage. Importantly, you should consider carrying Umbrella Insurance coverage – see below.
Umbrella Insurance Asset Protection
An umbrella insurance policy provides a minimum of $1 million in liability protection for your home and each auto covered under the same policy. And it costs an average of only $225 per year.
If you consider the cost of hospitalization for injuries sustained in a minor vehicle accident or a fall or accident in your home, $100,000 isn’t going to cover it. In other words, you are liable for the excess amount. Most umbrella policies have 1, 2, and 3 million dollar limits. Certainly, it would be best if you always carry enough liability insurance to cover the full value of your assets.
At the end of your life, or if you become incapacitated, if your home title, investment, or bank accounts in your name, they are at risk of Probate. It is essential to remember that a Will does not avoid Probate, a system that takes an average of 18 months or more to complete.
A Revocable Living Trust is a written, legal document that can avoid Probate. A Trust allows you to privately pass your assets to your family, friends, or charities after your death. These include your real estate, bank accounts, stocks, and minor beneficiary policies and accounts.
Compared to the cost and length of Probate, a Living Trust is one of the least expensive and best investments you can make for your family.
You might consider reviewing these asset protection strategies to ensure your home and your family’s financial security is secure.
This blog entry was created for information and planning purposes. Therefore, it is not legal advice. Please do not use this blog as legal advice, which turns on specific facts, as well as laws in specific jurisdictions. No reader of this blog should act or refrain from acting on the basis of any information included in, or accessible through, this blog without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a lawyer licensed in the reader’s state, country or other appropriate licensing jurisdiction