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Can persons from other states declare their intent to reside in Texas and designate a protected homestead within the state? This is not a difficult test since there is no minimum number of days a person must physically reside in Texas in order to claim a homestead. If someone has multiple lawsuits and judgments, then moving to Texas to establish a homestead may be an excellent asset protection strategy, particularly if it can plausibly be done in the ordinary course of life and business. After all, people move to Texas every day for many good reasons. A family may have only one homestead-which raises the question, what is a family?
This section does not apply to the sale of a family homestead to a parent, stepparent, grandparent, child, stepchild, brother, half brother, sister, half sister, or grandchild of an adult member of the family. An instrument that made a voluntary designation of a homestead in accordance with prior law and that is on file with the county clerk on September 1, 1987, is considered a voluntary designation of a homestead under this section. Is recorded in the real property records of the county in which the property is located. The homestead claimant's proceeds of a sale of a homestead are not subject to seizure for a creditor's claim for six months after the date of sale. If the borrower defaults on the loan, a home equity lender’s recourse is limited as compared to most other mortgages and loans. For example, any foreclosure of a home equity loan must be through judicial proceedings , and cannot proceed as a private foreclosure.
Call a Dallas-Fort Worth Bankruptcy Attorney to Discuss Texas Homestead Exemptions
Note, Texas no longer provides a homestead exemption to businesses exclusively; instead, the statute allows the urban classification to apply to both home and businesses. Texas courts have repeatedly determined that the homestead lies on the intent of how the individual plans to use the property even though the individual does not necessarily have to reside on the property. The Texas homestead right is a powerful legal tool to exercise, protecting the home, the property it sits on, personal property on it, and any oil, gas, or minerals underneath the ground.
Texas explicitly designed this constitutional right to shield debtors and homeowners from creditors. Information in this article is provided for general informational and educational purposes only and is not offered as legal advice upon which anyone may rely. No attorney-client relationship is created by the offering of this article. This firm does not represent you unless and until it is expressly retained in writing to do so. Legal counsel relating to your individual needs and circumstances is advisable before taking any action that has legal consequences. Consult your tax advisor as well, since we do not give tax advice.
Texas Homestead Law
As do some cities in Texas, for purchasers seeking homestead protections, and any homebuyer seeking such protections should ask their attorney or real estate agent for help in filing a homestead affidavit. On a separate but important issue, division of community property is not abandonment when it comes to the homestead exemption. When a couple divorces and one spouse moves out and conveys his or her interest to the other, the homestead endures so long as the resident spouse remains. A judgment lien against the departing spouse does not attach to the property because the resident spouse’s homestead interest is undivided and unaffected. Hankins v. Harris, 500 S.W.3d 140 (Tex.App.-Houston [1st Dist.] 2016, no pet.). Asset protection planning in Texas relies on constitutional and statutory homestead protections plus formation of an LLC (or a two-LLC or hub-sub structure) for investments, with the goal of utilizing anonymity techniques whenever feasible.
For example, the joint statement advises that a prior attorney general opinion indicates that the safest course for lenders is to wait until Jan. 1, 2018, before providing the new version of the 12-day disclosure notice. Thus, the earliest date a closing could occur under the 2017 amendments is Jan. 13, 2018, assuming the new notice is given on Jan. 1, 2018. The new disclosure also has implications for home equity loans made in December 2017 under existing law. For these loans, theTexas Bankers Associationhas advised lenders that the last day to send their 12-day disclosure notice is Dec. 19, 2017, for a Dec. 31, 2017 closing date, with the disclosures and fee cap under current law.
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Once established, however, the initial characterization of the property as urban or rural continues even if the nature of the surrounding area changes. Knowing Texas home equity laws can help you plan how and when you use your home’s equity. These laws apply to home equity loans, home equity lines of credit, and cash-out refinances. Over the years, Article 16 allowable types of indebtedness have increased. In 1997 Texas, for the first time, allowed homeowners to use the equity in their home as collateral for unrestricted cash borrowing. There are significant limitations on this type of loan, the most important being that a home equity loan plus other secured indebtedness (balance due on a mortgage and/or home improvement loan) cannot exceed 80% of the equity in the home.
If one spouse passes away, the surviving spouse may retain the family status. Mr. Willis is board certified in both residential and commercial real estate law by the Texas Board of Legal Specialization. “Texas law is well settled that cannot attach to a homestead as long as the property remains homestead.” Wilcox v. Marriott, 103 S.W.3d 469, 473 (Tex.App.-San Antonio 2013, pet. denied).
The home is a sacred place in Texas, going back to the earliest times when it was only a territory. One of the earliest inducements Texas had in the 19th Century was providing homestead protections to bring settlers to the state. If everything is bigger in Texas, the Texas homestead is easily the most significant shield in the United States. In order to establish an urban business homestead the head of the family must actually have a business, the land must be reasonably adapted and necessary to that business, and the property must actually be used as the place to conduct the business. As you can imagine, these kinds of determinations may depend heavily on the facts of each individual case. Texas Family Code Section 5.001 requires the signature of both spouses in order to convey the homestead except under unusual circumstances.
This article outlines unique protections available to an individual’s residence and personal property by what are commonly referred to as “Texas homestead laws,” found in Texas Constitution Article XVI, Section 50 and Property Code Chapters 41 and 42. Our focus is on Texas law, not rules or exemptions under federal or bankruptcy law. It is worth observing, however, that bankruptcy rules are tougher on debtors than Texas law.
A homestead can be rural or urban, with a house of nearly any side, and property that can extend upwards of 100 acres for a single person, and 200 acres for a family. Statutes and case law have grown to include many personal property implements and fixtures on the homestead land. When you combine overarching homestead protections with the prohibitions against wage garnishment in Texas, you get a clear picture of how hard it is for a third-party creditor to dismantle a person’s life.
However, the exemption does protect a constituent unit of the family which remains in the home after the divorce. Coahuila and Texas, which exempted certain lands from creditor claims. It’s a legal right to protect your home, the property it sits on, and more. In the case of a minor child or an elderly person, the support does not to be strictly financial, but could be emotional instead. However, support of a dependent adult must always be financial.
According to the Texas Constitution and Section 270 of the Texas Probate Code, the homestead of a family, or of a single adult person, shall be, and is hereby protected from forced sale, for the payment of all debts except for the exceptions listed by the Code. If you inherited property, you may be eligible as an heir property owner to be considered the sole owner for the residence homestead exemption. May I continue to receive the residence homestead exemption on my home if I move away temporarily? If you temporarily move away from your home, you may continue to receive the exemption if you do not establish a principal residence elsewhere, you intend to return to the home, and you are away less than two years. You may continue to receive the exemption if you do not occupy the residence for more than two years only if you are in military service serving inside or outside of the United States or live in a facility providing services related to health, infirmity or aging. In a family homestead, as long as real property is a family homestead by virtue of one spouse’s intention and use, that property is protected by the homestead exemption, unless abandonment is pleaded and proved.
Add a living trust to the mix, and asset protection and basic estate planning can be effectively integrated. This legacy has survived to the present day, in two important factors. Texas law prohibits garnishment of wages, and protects one’s home from being foreclosed, to pay debts, EXCEPT FOR, specific obligations listed in Article 16, Section 50 of the Texas Constitution. Allowable loans include purchase money mortgages and loans to finance home improvements. Article 16 puts strict limitations and conditions on the types of loans and indebtedness where a homestead could be used as collateral.
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