6 Ways to Protect Your Home From a Lawsuit

For most of us, our home is one of our most valuable assets. It truly is our “castle,” but can also be one of our most vulnerable assets. Although we need to protect it at all costs, we face several dilemmas that create significant hurdles to protecting the complete value of our home from a lawsuit.

Is an LLC a Solution for Your Primary Residence?

First, I’m concerned about the LLC being a simple ‘silver bullet’ solution to protecting a home. An LLC wasn’t designed or built for this purpose. The LLC is perfect for income-producing assets, a cabin, beach house, farm, a 2nd home in a VRBO or Airbnb strategy. How is a personal residence a business asset?

The answer is that it’s not. If I was a litigation attorney going after a debtor’s home in an LLC, I would immediately attack the corporate veil. This is done by claiming a co-mingling of personal and business assets, to say the least. How do you have a ‘separation’ of personal assets and business assets when they’re all in the same LLC? It doesn’t make sense.

If someone is selling you an LLC as the perfect solution, have them put it in writing that it will protect them or you. They’ll be on the hook if it doesn’t—no way…it’s not going to happen. I think there are better solutions. I don’t even include the LLC in my 6 options to better protect your home.

The Moving Target of Equity

The second dilemma is that our property is continually increasing in value, and the equity is clearly a ‘moving target’. Therefore, we are forced to protect a level of equity that is consistently changing (and hopefully increasing). Any plan to protect your home requires constant updating and revisiting of your strategy on a regular basis.

To Pay Off or Not to Pay Off My Home

Most of us have been taught for years that it is a wise long-term policy to pay down our mortgage (pay off our home). Doing that will contribute to increasing the equity in our home. Many people view paying off their home as the pinnacle of their lifetime’s work. Regrettably, a creditor or plaintiff will view this as the “golden egg” in his or her efforts to collect a payment from you in a lawsuit.

Please be open to protecting your equity in creative ways. I’m not saying that it’s bad to pay off your mortgage and own your home free and clear. However, it is naïve to pay off your home without realizing that you are exposing yourself to a loss in the event of a lawsuit.

In my opinion, there are 6 legitimate ways to protect our home from a potential lawsuit. They will vary based on where we live in the country, our marital status, and the amount of equity involved.

1. Homestead Exemption

This is a statutory exemption available in most states to protect a certain amount of the value of a person’s home from a creditor or bankruptcy. The amount varies from state to state, as do the laws on how to avail oneself of this protection. Essentially, if a creditor comes after you in a lawsuit and forces the sale of your home, they only get the residue after selling costs, the mortgage, and your ‘homestead exemption’ amount.

In states like Florida and Texas, citizens enjoy an unlimited homestead exemption. In those states, it’s very difficult for creditors to ever get a debtor’s home. O.J. Simpson exploited this law, and since then, they modified the law to prevent new residents such as O.J. from pulling the same trick. However, it can be a powerful tool for citizens in several states.

This tool is available in 44 states and is a law specifically designed to protect a certain amount of equity in a person’s residence from a variety of creditors. The homestead exemptions vary from state to state. There are different rules on how to qualify for and satisfy the particular requirements of the homestead exemption based on the jurisdiction. Approximately twenty-one states even require that a homeowner file appropriate paperwork to qualify for the exemption.

If homeowners want to take advantage of this exemption, it is essential that they have a general understanding of their state’s law and consult with their asset protection professional.

2025 Update:

• As of 2025, states like Florida and Texas continue to offer unlimited homestead exemptions, providing robust protection against creditors.
• Conversely, states such as New Jersey and Pennsylvania do not offer any state-level homestead exemption.
• Oregon has significantly increased its homestead exemption to $150,000 for individuals and $300,000 for joint owners, effective January 1, 2025. ​World Population ReviewSaalfeld Griggs PC Law

2. Tenancy by the Entirety

If your state allows it, you can title your personal residence as “Tenants by the Entirety,” thus protecting your home from a lawsuit in a unique way. In a nutshell, the benefit of this protection is that if one spouse is sued, the property cannot be attached or bifurcated with a lawsuit. For example, if a husband gets into a terrible lawsuit, it’s not fair that the wife loses the house when the lawsuit had nothing to do with her. There are approximately 15–20 states that have this law on the books, including Hawaii (as if you needed another reason to move to the Aloha state).

2025 Update:

• As of 2025, tenancy by the entirety is recognized in 25 states and the District of Columbia.
• States recognizing this form of ownership include Alaska, Arkansas, Delaware, Florida, Hawaii, Illinois, Indiana, Kentucky, Maryland, Massachusetts, Michigan, Mississippi, Missouri, New Jersey, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, Tennessee, Vermont, Virginia, and Wyoming. ​Forbes+5World Population Review+5Alper Law+5

3. Equity Stripping

Equity stripping is simply the strategy of placing a lien on your home with a mortgage. In essence, you are ‘removing’ the equity by replacing it with a loan. This makes your home much less attractive to a potential creditor that wants to take your home to satisfy a judgment.

The trick is in the implementation of the loan. Ideally, a traditional HELOC or even a 1st Mortgage lien (wherein you utilize the loan proceeds to invest and create additional wealth) is a perfect fit. It’s legitimate and difficult for a creditor to challenge in court and ‘step in front’ of a valid lien holder on the title to your primary residence.

Evidently, some homeowners will choose to implement

Evidently, some homeowners will choose to implement a ‘smoke and mirrors’ strategy by creating a shell company, with some degree of secrecy, and liening their own home. The procedure essentially clouds the title and gives the public perception (anyone doing a title or asset search), that your home is liened to the hilt and there isn’t any equity to be had in a lawsuit.

This strategy can be successful in dissuading a lawsuit, but in a court battle, a judge or plaintiff would slice right through the structure once they discover the scheme that was created.

4. Domestic Asset Protection Trust (DAPT)

As a nation, we are becoming more and more comfortable with this type of trust. Over 15 States in the Country have these laws on their books and, under Federal law, they would be generally recognized and upheld in a lawsuit in any state.

Typically, you would place any personal residence, cabin, beach house or farm you plan on keeping for life (or at least making very minor moves/changes if necessary) in this type of trusts, and the longer you keep them there the better protection they afford.

2025 Update:

✔️ The longer assets remain in the trust, the stronger the protection—some states enforce a 2–4 year seasoning period before protections take effect.

✔️ As of 2025, 20 states now offer legal frameworks for Domestic Asset Protection Trusts (DAPTs). This includes Alaska, Delaware, Nevada, South Dakota, Tennessee, Utah, Missouri, and others.

✔️ While DAPTs offer powerful protection against future creditors, their effectiveness can still be challenged in courts of states that do not recognize these laws. Always consult with an experienced asset protection attorney when setting up a DAPT.

5. Put the Title to the Home in the “Low-Risk” Spouse’s Name

In some situations, one spouse may have a “risk issue” with their lifestyle or business and removing their name from the title of the home could help protect it. The effectiveness of this strategy varies dramatically from state to state. It’s critical to get a consult with a lawyer that understands the law in your particular state or can at least research it to confirm your current standing.

Meanwhile, if one spouse has a more risky occupation or lifestyle, it can be extremely strategic to place assets in the other spouse’s name. In general, the creditors of one spouse cannot reach the “separate” assets of the other spouse.

Therefore, asset protection in the context of marriage requires a strategy. The valuable assets are as a “separate” property of the spouse with the least exposure to risk. This is where a marital property agreement (i.e. a prenuptial or postnuptial agreement) can be beneficial. If the spouses can agree that certain assets will be the separate property of the spouse with less exposure to lawsuits.

For example, in most states, if the husband is a business owner who incurs liabilities, the couple can enter into an agreement that certain valuable assets will be the wife’s separate property. Doing this will thereby be shielding those assets from the husband’s creditors. If both spouses agree to be co-debtors on a debt, such as when spouses both sign a mortgage on the family house, then spouses will be jointly liable.

Of course, a word of caution with this planning strategy: Divorce. Thus, think carefully before placing assets in your spouse’s name and the impact of a post-nuptial or separate property agreement. You may protect your assets from a creditor, but throw your assets into harm’s way with a divorce.

6. Umbrella Insurance

Finally, umbrella insurance is just that. It’s an “umbrella” of insurance that covers a variety of situations that could possibly create a claim. This type of insurance can be personal or business in nature. It functions as an “umbrella” over any other type of insurance you may carry. It will cost an average of $300–$500 a year for $1M to $2M of coverage.

With that said, don’t assume it will protect you in every instance. As a rule, umbrella insurance isn’t going to cover fraudulent, criminal, reckless or even negligent action.

Above all, I’m a huge fan of making sure you have proper insurance coverage. Any attorney that recommends you simply rely on legal structures and not buy insurance is taking a serious risk on your behalf.

2025 Update:

• ✔️ Many top insurance providers now offer digital policy bundles for umbrella insurance—check with your home or auto provider for bundled discounts.
• ✔️ Policy pricing remains relatively stable in 2025: expect to pay $300–$600 per year for $1M to $2M in coverage depending on your risk profile.

Final Thoughts: Protecting Your Primary Residence in 2025

In summary, when it comes to protecting our personal residence from a lawsuit, every person’s situation is different. The state you live in may complicate things. Your profession, marital situation, risk tolerance, and equity level should all influence your strategy.

Please consider the options above and consult with an attorney at our office for an asset protection plan suited to your needs.

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