The old joke about banks is that they only lend money to people who don’t really need it.
The California homestead law has the same problem.
Just when you need the homestead to protect the equity in your home, the homestead protection expires.
The homestead protection for the proceeds of a sale of your home vanishes 6 months from the sale, unless you buy another home
If your financial life is healthy, you’re young and working, buying another home is no big deal.
But if you’re retired, disabled, or out of work, buying a new home may be out of the question.
And unless you buy a replacement home, the homestead proceeds become available to your creditors.
Homes as retirement vehicles
All too many Californians see the equity in their home as their retirement “plan”. With the high cost of real estate, buying a home often squeezes out genuine retirement savings.
All’s well until it comes time to tap that equity at retirement. If getting to the money requires the sale of the home, the senior is left with as much as $175,000 in proceeds that was, before the sale, protected from lien or levy by a creditor with a judgment.