Estate Planning

What Property is Exempt from Creditors' Claims in NC?

By Gregory Herman-Giddens

If you were ever to be sued, what property would be protected in the event of a judgment against you?

Homestead - only $18,500 of the value of your home.  If you are over 65 and your deceased spouse (or significant other, etc.) was an owner of the home also, the amount protected is $37,500.

Tenancy by the Entirety property - real estate owned by a husband and wife is protected against creditors of either spouse (but not joint creditors),

ERISA Retirement Accounts - 401(k)s, 403(b)s, 457 plans are protected by federal law.

IRAs - protected by NC law.  Protection of IRAs rolled over from ERISA plans is limited to $1 million in bankruptcy.  Inherited IRAs do not necessarily have the same protection, at least in bankruptcy.

Life Insurance - proceeds payable to a beneficiary are protected from creditors of the policy owner provided the beneficiary is not the owner or the insured.

Tangible Personal Property - vehicles are protected up to $3,500 and household furnishings up to $5,000.

529 College Savings Plans - protected up to $25,000.

For details, see NCGS Section 1C-1601.  As you can see, beyond retirement accounts these protections are minimal and do not substitute for adequate liability insurance and proper asset protection planning.  In addition, these same exemptions do not apply to Medicaid eligibility for nursing home care, which has a completely different set of rules.  Retirement accounts are NOT exempt for Medicaid purposes.

Full post as published by North Carolina Estate Planning Blog on October 09, 2008 (boomark / email).