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Personal Asset Protection 101 / Lesson 04

Home Equity, Marital Property, and Title in California

How the California homestead exemption, community property, separate property, and title affect judgment collection.

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The California homestead exemption may protect part of the equity in a primary home during judgment collection. Community property can remain liable for a debt of either spouse. The name on a deed does not decide either result by itself.

The homestead exemption protects part of home equity

California's homestead exemption protects part of home equity from a forced sale by a judgment creditor. Code of Civil Procedure section 704.730 sets the amount. It is the greater of $300,000 or the prior year's countywide median sale price for a single-family home. The statute caps the amount at $600,000. Both statutory amounts receive an annual inflation adjustment that began on January 1, 2022. Use the current adjusted amounts and county median.

The exemption can protect equity up to the applicable amount. A creditor may pursue equity above that amount, subject to the enforcement process and other law. The exemption does not affect a mortgage or another voluntary lien. It also does not prevent a tax sale or mortgage foreclosure. This protection exists without a new trust or entity.

Community property can be liable for either spouse's debt

California generally treats property acquired during marriage while the spouses live in California as community property. Family Code section 760 states this rule. Under section 910, the community estate can be liable for a debt that either spouse incurred before or during marriage.

A deed in one spouse's name does not itself make community property separate property. A judgment against one spouse can reach the community estate. Family Code section 913 applies a different rule to genuine separate property. One spouse's separate property is generally not liable for the other spouse's debt. Determine the property's legal character instead of relying only on the deed.

California does not offer tenancy by the entirety

Tenancy by the entirety is a form of spousal ownership in some states. It can restrict claims by a creditor of only one spouse. California does not offer this form of ownership. Civil Code section 682 lists California's forms of co-ownership and does not include it.

California permits community property with right of survivorship under section 682.1. This form transfers the property to the surviving spouse without probate administration. It does not create the creditor protection associated with tenancy by the entirety. The community-property rule in Family Code section 910 still applies.

A valid transmutation requires a written declaration

Transmutation changes the legal character of property between community and separate property. Family Code section 852 requires an express written declaration. The spouse whose interest is reduced must accept it. A transmutation of real property must be recorded to affect third parties.

Family Code section 851 makes each transmutation subject to the laws for voidable transfers. A transfer after a claim arises can be challenged under the same law as any other asset transfer. It also changes each spouse's ownership rights. Complete the legal and financial review before either spouse signs. Read Judgment collection and asset transfers for the transfer rules.

Record current equity, title, community and separate interests, and the current homestead amount on the physician liability worksheet. These entries identify the portion of estimated equity above the current homestead amount. They do not determine what a creditor can collect.

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