LivingTheory
Dryer sheet wannabe
- Joined
- Feb 10, 2019
- Messages
- 21
I'd love to hear the group's take on if acquiring an Umbrella policy makes sense. A few calculators online said that it's not necessary for our current assets but I think looking at the minutiae changes that answer.
The majority of our assets are in retirement accounts or an HSA. Only about $40k is in after-tax accounts for our emergency fund, revolving checking, and larger slush fund. Excluding any ERISA accounts, our state provides creditor protection up to $1MM of retirement savings. We're below that mark in our IRAs so no liability concern. However, our home equity is much more exposed.
We live in a state that only protects $75k equity through homestead exemption. This is a hard cap even if married (doesn't double). A sale could be forced to pay out the equity above that amount if a lawsuit forces us into bankruptcy. Although we'd still have our retirement assets intact and that could serve as a last resort to avoid bankruptcy. Our home equity is around $320k now and will likely be closer to $500k within three years.
This homestead exemption seems laughable having lived in states with unlimited protection. Either way, it's reality and something that we need to plan around. My thought is that we should get an Umbrella policy for ~$1MM even though our susceptible assets are well below that mark. I definitely wouldn't consider us "judgment proof" so I'd like better peace of mind.
Please let me know if I'm missing anything or if this seems like a logical course of action. We carry the highest liability on HO and Auto already. Thank you.
Side Note: Home is owned fee simple and not in a trust. Our estate plan creates a testamentary trust since probate here is pretty reasonable. I'm not sure if having it owned by a trust would change the liability question.
The majority of our assets are in retirement accounts or an HSA. Only about $40k is in after-tax accounts for our emergency fund, revolving checking, and larger slush fund. Excluding any ERISA accounts, our state provides creditor protection up to $1MM of retirement savings. We're below that mark in our IRAs so no liability concern. However, our home equity is much more exposed.
We live in a state that only protects $75k equity through homestead exemption. This is a hard cap even if married (doesn't double). A sale could be forced to pay out the equity above that amount if a lawsuit forces us into bankruptcy. Although we'd still have our retirement assets intact and that could serve as a last resort to avoid bankruptcy. Our home equity is around $320k now and will likely be closer to $500k within three years.
This homestead exemption seems laughable having lived in states with unlimited protection. Either way, it's reality and something that we need to plan around. My thought is that we should get an Umbrella policy for ~$1MM even though our susceptible assets are well below that mark. I definitely wouldn't consider us "judgment proof" so I'd like better peace of mind.
Please let me know if I'm missing anything or if this seems like a logical course of action. We carry the highest liability on HO and Auto already. Thank you.
Side Note: Home is owned fee simple and not in a trust. Our estate plan creates a testamentary trust since probate here is pretty reasonable. I'm not sure if having it owned by a trust would change the liability question.
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