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Under the bankruptcy code, you're allowed to keep your primary residence up to a certain value or square footage, Armstrong says. Some states have homestead exemptions that prevent the forced sale of a primary residence to meet creditor demands. But homestead exemptions differ depending on where you live, and recent federal law imposes some restrictions on them.

Tenancy by the entirety, a form of common ownership between husband and wife, puts homes beyond the reach of creditors when one spouse has debts, Tarshis says, and it is not hard to set up in states that allow it.

"That protection is only good to the extent that the other spouse is not also a debtor," he says. "If both are debtors, it will not protect the asset. At the death of the first spouse, the asset will pass to the survivor, and that may not be the best estate tax result. You always have to balance asset protection against tax planning."

While there are no estate tax repercussions for assets passed to a spouse, a couple's beneficiaries may be adversely affected, depending on the total value of the estate. Tenancy by the entirety does not allow for the first spouse's interest in the property to be held in trust, and if at the death of the second spouse the total value exceeds $5.25 million, the overage will be subject to estate tax.


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