Arizona provides for an automatic homestead exemption of $150,000. This means that the equity in your home is protected from creditors up to that amount. Any equity over this amount may be subject to creditor claims.
Many people have been advised to put their homes into a family limited partnership, a corporation, or a limited liability company to protect the additional equity against creditors. This advice is unwise, as there usually is no business purpose for placing a home in such an entity. In such a case, the transfer may be set aside and creditors could still get access to your home.
Homeowners are increasingly using qualified personal residence trusts (or QPRTs) as a means to protect their homes from creditors. Historically, QPRTs have been used to reduce estate taxes upon a homeowner’s deaths. More people now see the benefits of utilizing this irrevocable trust for creditor protection. Since a QPRT is irrevocable and is a separate entity from the transferring owner, if it is properly created and managed it will protect the home from the reach of outside creditors.
There are positive and negative gift tax, estate tax, capital gains tax, and income tax ramifications with the use of a QPRT. There can also be some limitations imposed upon the use of the equity in the home. Furthermore, a QPRT must be established prior to the existence of a potential claim. If a QPRT is properly structured, under the right circumstances it can be a great benefit. Competent legal counsel who has experience in asset protection, and especially in creating QPRTs, can help you decide if this device is beneficial for you.
For more information or to schedule a free consultation, contact our office today at 888.222.1328.
- Four Things You Need to Know About Arizona Probate - October 22, 2026
- How Can You Streamline Your Estate Without Losing the Step-Up in Basis? - October 15, 2026
- Are Handwritten Wills Legal in Arizona? - October 8, 2026
Flagstaff
