In Texas, all homeowners receive homestead protection, a policy that marks your home as an exempt asset to prevent creditors from using it for the repayment of debts.
Because your home is a very important asset to protect, it’s important to understand the in’s and out’s of what homestead protection covers. From there, it’ll be easier to set up an estate plan that protects other important assets.
When selling your home
If you sell the home that was protected under the homestead policy, you’ll have up to six months to purchase a new homestead. If you will be renting or living in an assisted living facility you may choose another protected form of ownership to place the homestead on.
After six months, the property you buy will be subject to creditors if you have unpaid debts.
After the loss of a spouse
Because there are homestead policies for families and for single adults, you may be unsure of how your homestead is affected by the loss of a spouse.
A widow may retain the family status of the homestead. Otherwise, an adult can only achieve family status if he or she is obligated to support at least one other family member who is in some way dependent and living in the home.
A dependent family member is not exclusive to a minor. However, adults must be financially dependent on the head of the house, whereas children could be emotionally or financially dependent.
If you’re investing in other property
There can only be one homestead per family, so if you own more than one property, it’s important to consider which to make your permanent home. To claim a rural property as homestead, you’ll need to live there permanently and use the property to support your family. Rural homesteads are protected for up to 100 acres or 200 acres for those who are married. In urban settings, homestead protection provides up to 10 acres of protection.
Rental property is not protected by the homestead exemption.
Protecting non-exempt assets
If you have a second property or other valuables that are not protected from creditors efforts, talking to an estate planning lawyer may help you put the necessary forms of asset protection in place to keep these assets in your family after you’re gone.
A lawyer can help you file the proper documentation to leave your homestead to your beneficiaries and help protect other types of property from creditors, such as retirement saving plans, college saving plans, automobiles and more.