Make sure you are protected – California Homestead increased in 2021

Have you ever thought of homesteading your property and just never made the time? Or have you heard of the homestead declaration and just not sure what it is? Well, now is a great time to find out!

Homestead exemptions were first created in the early 1800s, the only way a homeowner could protect their homestead from creditors was to record a homestead declaration. However, over the years many states moved to a statutory homestead exemption that no longer required the extra step of recording the homestead declaration.

There are two types of Homestead Exemptions in California:

• Automatic: Applies only upon forced sale of the property. The automatic exemption requires continuous residence from the date the judgment creditor’s lien attaches until the date the court determines that the property is a homestead. If a creditor attempts to sell the home, the burden of proof is on the homeowner to prove to the court that an automatic homestead exemption exists.

• Declared: Applies both to forced and voluntary sales of the property. Exempt proceeds from a voluntary sale are protected if another home is purchased within six (6) months. Homeowners must reside in the property on the date the homestead declaration is recorded. If a creditor attempts to sell your home, the burden of proof is on the creditor to prove to the court that your homestead declaration is invalid.

Filing a declaration may be a good idea if you have equity in your home. Even though in California exemption is automatic, by declaring a homestead it can protect proceeds of a voluntary sale of your property for six months. Bill AB1885 which updated CCP § 704.730 took effect on January 1, 2021 and dramatically increased the exemption for homeowners. Under the previous code, the amount of equity that could be protected was:

• $75,000 for single homeowners

• $100,000 for families

• $175,000 for seniors, disabled, and low-income proprietors

However pursuant to the updated code, the amount of the homestead exemption is the greater of the following:

1. The countywide median sale price for a single-family home in the calendar year prior to the calendar year in which the judgment debtor claims the exemption, not to exceed six hundred thousand dollars ($600,000).

2. Three hundred thousand dollars ($300,000).

Additionally, the amounts specified in this section will adjust annually for inflation, beginning on January 1, 2022, based on the change in the annual California Consumer Price Index for All Urban Consumers for the prior fiscal year, published by the Department of Industrial Relations.

If you are uncertain about homesteading your property, you may want to seek legal assistance or speak with your tax consultant. Legal Document Assistants are not attorney’s and can only provide self-help at your discretion. However, if you have made the decision to move forward and need assistance preparing the form, please contact us today!

(California Legislative Information, 2022)

(County of Riverside: Assessor County-Clerk Recorder, 2022)

(Riverside County Law Library, 2022)

(Cara O'Neill, 2022)

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