By Michael Ioane
Your home is not just a building—not just concrete and drywall with paint slapped over it. As the famous saying goes, “A man’s home is his castle.” The Michael Ioane household certainly is, and you need to make sure that yours is, too. Your home is your safety net from the hard job with the disapproving boss, or a place where your kids can turn in for a night and not face the dangers of the outside world. The majority of our memories are built out of the everyday foundation of our homes. But did you know that you could lose your home?
Not due to debt or bad checks, but due to lawsuits.
Thankfully, many states have enforced “Homestead Protection Laws” that label a certain monetary amount of your house is guarded from the hands of creditors.
Let me give you an example that I often give my clients when they come in asking, “Michael Ioane, how is my house protected from creditors?” What I tell them is this:
Mr. Kirkman is a surgeon. He lives in a state with Homestead Protection Laws of $50,000. But what if Mr. Kirkman has no more than $35,000 equity on their home and ended up in court for a botched heart surgery? What if he lost that case? That means that the prosecutor who won the case would not be able to foreclose his house. His house would be his castle.
That all sounds nice, doesn’t it? Most of my clients nod and say, “Thanks, Michael Ioane. Good enough.” Unfortunately, it is not always good enough. The sad truth is that most states have Homestead Protection Laws that protect equity of less than $10,000. Texas is one of the few states that allow unlimited Homestead Protection, but recent bankruptcy laws demand that a homeowner wait a long number of years to qualify for that protection.
Not to mention that Homestead Protection does not protect you from Uncle Sam. Michael Ioane is a believer in the U.S.A., you can believe that, but I’m not pretending for one minute to trust the fate of my house—my family—to the IRS. If they put a lien on my house, or foreclosed, state laws could not stop them. I would watch as the Ioane household is sold off. That could happen to you.
Your family would not have shelter. Your heirs will not be able to claim it from your will.
My clients usually get nervous right about then. “Michael Ioane, what can I do?” they ask.
In response, I have developed a unique trust: the Flex Trust.
The Flex Trust is special. It is designed so tightly that it prevents you from losing income tax benefits of owning a home. Interest deductions will be made and the $500,000 Capital Gains exclusion is still in effect, but you can move in to another home with no drawback worries.
The Flex Trust also drops the value of taxable estate and your home will be shielded from creditors, even those from the federal government. The gist of the Ioane Flex Trust is this:
- Trust provides that any heirs will earn assets in trust when you die
- Trust buys a part of your home value and you are the owner, so no gains due on sale
- Enter a buy-sell agreement with the trust so that it can buy the interest on the home at fair market value
- When you die, your home ends up priced at its fair market value when it comes to estate taxes.
Thanks to this, you will save a large amount on your estate taxes and protected your castle from predatory creditors. This is Michael Ioane, hope helping you be the knight your family needs.
A few definitions follow, for those who need them:
Asset Protection
Keeping this simple, if you enter into a buy-sell agreement with your trust, so are any creditors. If you run into danger, your trust will jump in and buy the home from creditors at a low amount. The trust will need to pay a 30 year interest only promissory note.
Estate Taxes
After you die, everything owned by you—house, car, that grill—are calculated together to see if the heirs owe estate taxes.
Probate
Figuring out the legal title of the assets of the deceased; assets in the Flex Trust will not fall under probate rules since they are owned by the trust.
My Book “The Asset Protection Manual” can be purchased for $19.95, by going to www.assetprotectionmanual.com other books by Michael Ioane, “The Boston Tea Party”, it is a detailed work manual and can be purchased for $199.00 by going to www.bostonteapartybook.com