If you’re a North Carolina homeowner, you may have heard mentions of the “homestead exemption,” but aren’t sure exactly what it means or how it might protect you. This important legal provision could be crucial in protecting your primary residence during financial hardships.
The North Carolina homestead exemption is a legal provision that helps protect a portion of the equity in your primary residence from certain creditors. It’s essentially a shield that prevents creditors from taking your entire home to satisfy debts.
The homestead exemption in North Carolina primarily protects homeowners from:
It’s important to note that this exemption applies only to your primary residence, not to vacation homes, rental properties, or other real estate investments you might own.
Unlike some states with unlimited homestead exemptions, North Carolina offers a more modest level of protection. Currently, the North Carolina homestead exemption protects up to $35,000 in home equity for individuals under the age of 65. For homeowners 65 or older, the exemption may be up to $60,000, provided certain conditions are met.
As our estate planning attorneys often explain to clients, “The homestead exemption in North Carolina is not a substantial amount relative to the fair market value of most homes in North Carolina, but it generally sets a foundation that can prevent a creditor from taking the entirety of the equity of a home.”
To put this in perspective:
This means that in a worst-case scenario like bankruptcy, you could potentially lose a portion of your equity, but not necessarily your entire home.
For married couples in North Carolina, there’s an additional layer of protection beyond the standard homestead exemption. This protection comes in the form of “tenancy by the entirety” (TBE), a special form of property ownership available only to married couples.
Tenancy by the entirety provides significant protection against individual debts of either spouse. When we are married and own homes together as a married couple, we have another layer of asset protection called tenancy by the entirety, which allows an individual debt of one spouse to be prevented from placing a lien against the home itself.
This means that if only one spouse incurs a debt (like medical bills or a personal loan), creditors generally cannot force the sale of the home to satisfy that debt. The only way creditors can reach a home owned as tenants by the entirety is if:
This protection makes tenancy by the entirety an extremely valuable asset protection tool for married homeowners in North Carolina.
While the homestead exemption provides valuable protection, it’s important to understand its limitations:
The homestead exemption doesn’t protect against:
To claim the homestead exemption in bankruptcy or against judgment creditors, you must:
Courts may disallow homestead exemption claims if:
Since the North Carolina homestead exemption offers limited protection compared to the value of many homes, consider these additional strategies:
If you’re married, ensure your property is properly titled as tenants by the entirety. This specific form of ownership must be explicitly stated in your deed. If you’re unsure about your current title status, our attorneys can review your deed and advise on any necessary changes.
For single homeowners or those with substantial equity beyond the exemption limit, consider:
Regardless of your situation:
At Cary Estate Planning, we understand that your home represents both financial security and precious memories. Our personalized approach to asset protection ensures that we recommend strategies tailored to your specific situation.
During our initial Discovery Call and subsequent Strategy Session, our attorneys will:
Understanding the homestead exemption is just the first step in comprehensive asset protection planning. With proper planning, you can significantly enhance the protection of your home beyond the basic exemption amounts.
Contact us today to schedule your Discovery Call and take proactive steps to protect your most valuable asset—your home.
This article provides general information about the North Carolina homestead exemption and related asset protection strategies. It is not legal advice. For guidance specific to your situation, please consult with an experienced estate planning attorney.
Paul Yokabitus is the CEO and Managing Partner of Cary Estate Planning, a Cary, NC, estate planning law firm. With years of experience in estate and elder law, he has zealously represented clients in various legal matters, including estate planning, guardianship, Medicaid planning, estate administration, and other cases.
Paul received his Juris Doctor from the Campbell University School of Law and is a North Carolina Bar Association member. He has received numerous accolades for his work, including being named among the “Best Attorney in Cary” in 2016 and 2017 by Cary News and Rising Star in 2020-2023 by Super Lawyers.