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How Arizona Prop 209 Affects Home Equity

On Behalf of | Dec 28, 2023 | Estate Management, Exemption, Homestead Exemption, Prop 209

In November 2022, Arizona voters approved Proposition 209 which included approval of the Predatory Debt Collection Protection Act (PDCPA). Although this act was publicly billed as protecting Arizonans from medical debt collectors, this act has impacts far beyond medical debt. In the estate planning realm, it increased the amount of home equity protected by Arizona’s homestead exemption from $250,000 to $400,000. On January 1, 2024, this amount will again increase to keep up with inflation.


What is the homestead exemption?

Arizona law provides for a number of various property exemptions that are designed to protect a certain floor of assets from creditors, including estate creditors after your death. The homestead exemption protects the equity you may have in your home from creditors. This exemption is designed to protect your home, which is many Arizonans’ largest asset, from creditors and to prevent the unfortunate scenario of losing your home.


What does Prop 209 do?

Prop 209 significantly increased the homestead exemption from $250,000 to $400,000. This means exactly what you may be thinking – more protection from creditors. Furthermore, Prop 209 provides for annual increases indexed to inflation, with the next increase coming on January 1, 2024. This will likely only be a modest increase of a few percentage points, but every dollar that is protected matters in these scenarios.

For example, let’s say you purchased your home in 2015 for $300,000. If your home is currently worth $600,000, then you would have $300,000 in equity. Under previous law, $50,000 of this equity could be subjected to creditors’ claims. However, Prop 209 would protect all $300,000 in equity since the homestead exemption is now extended up to $400,000. 

Prop 209 also expands other property exemptions, including those for household goods ($15,000), vehicle equity ($15,000), and personal bank accounts ($5,000). These exemptions ensure that you are able to maintain a certain amount of assets without needing to worry about them being used to satisfy a creditor’s claim.


Concluding Thoughts

Arizona Prop 209 has had a huge impact on Arizona’s homestead exemption. The effect of the proposition has been to increase the amount of protection Arizonans have from creditors’ claims. If you are currently handling the estate of a loved one and are curious about how the homestead exemption may apply in your case, schedule a consultation with us today to learn more!