1. What is a homestead?
A homestead is a residential structure that you use as a home. It is the primary place where you reside, whether you live by yourself, or with your family. The homestead can contain one or multiple parcels of land. In Texas, a homestead cannot exceed the size of ten acres in cities and towns, or two hundred acres in rural areas.
2. What are homestead laws?
Homestead laws, also referred to as “homestead exemptions,” protect the homestead for the homeowner(s), and in some cases, the occupants of the home. For example, homestead exemptions can protect the homeowner and its occupants from claims made by certain creditors, forced sale(s), or certain debts. Homestead exemptions in Texas also offer reductions in property tax for the homeowner’s primary residence. Finally, homestead exemptions in Texas provide protections from the deceased homeowner’s debts and creditors, for the surviving spouse, minor children and adult children of the deceased homeowner who live in the home.
3. What states have homestead exemption laws?
Almost every state has a homestead exemption law. Depending on the state and sometimes the county, protections of the homestead exemption law may vary. Texas has some of the most generous homestead laws in the United States. Texas residents who have claimed a homestead exemption are able to have the value of their property reduced for tax purposes. Elder and disabled Texas residents enjoy further reductions on the property taxes of their homestead.
4. How do you apply for a homestead exemption?
To obtain a homestead exemption, a Texas homeowner must complete an application and file it with their county appraisal district. The application can usually be found online on the county appraisal district website of the county where the homeowner resides. The Texas Comptroller also has an application for the homestead exemption on its website. However, the form must be filed in the appraisal district of the county where the house is located, and not with the Texas Comptroller.
5. Who can apply for a homestead exemption?
Only a home owner, who actually resides in the home on the date the application is made, can apply for a homestead exemption. A home owner or “homeowner” is anyone who has purchased or acquired a legal interest in residential real estate. A renter is not eligible for a homestead exemption. As long as the resident owns some interest in the home, they can make the application for a homestead exemption. They do not need to own 100% of the home, and even a “life estate” holder is entitled to claim a homestead exemption. A homeowner of mortgaged property may also claim a homestead exemption. When applying, the homeowner will need to present a personal identification card (usually a driver’s license) that shows the home address on their identification card.
6. Can a person have more than one homestead?
No. Only a homeowner’s primary residence qualifies as a homestead. And married couples may only claim one homestead!
7. What is the new homestead law in Texas about?
On September 1, 2023, Texas Senate Bill 1801 became law. Senate Bill 1801, which is codified as Section 11.43(h-1) of the Texas Tax Code, requires each appraisal district to develop a program to periodically confirm that a homestead claimant still qualifies for the homestead exemptions. The chief appraiser for the county must review each resident’s homestead exemption at least once every five years to ensure the homestead still qualifies for the exemption. In sum, Texas residents must “re-certify” their homestead exemptions with the county. Tex. Tax Code § 11.43 (LexisNexis, Lexis Advance through the 2023 Regular Session; the 1st C.S.; the 2nd C.S.; the 3rd C.S. and the 4th C.S. of the 88th Legislature; and the November 7, 2023 general election results). However, this change is procedural in nature and doe not alter existing state laws concerning the protections offered by the Texas homestead exemptions. For more information on this new process, Texas residents will need to contact their home county’s appraisal district.
8. Can I “Will” my homestead?
Yes! In Texas, a homestead can be transferred to beneficiaries named in a Will. Texas residents should consult an estate planning attorney to understand how to correctly gift a homestead through a Will. Texas also provides other ways to transfer a homestead that do not involve a Will or probate of a Will. Another legal method is to use a Transfer on Death Deed. Like a beneficiary designation on a life insurance contract, a Transfer on Death Deed allows the homeowner to transfer the real estate to an individual beneficiary named on the deed, upon their death. At the homeowner’s death, the beneficiary of the deeded property who also occupies the home, can claim a homestead exemption. The homeowner can name more than one beneficiary on the deed and they would each receive an equal interest in the home. Similarly, a homestead can be transferred to a beneficiary through an enhanced life estate deed (“ladybird deed”) and avoid the probate process.
9. Can I put my homestead in a Trust?
Yes. You can transfer any real estate interest into a trust by a deed, including your homestead. To continue claiming the homestead exemption after the residence is transferred, the Trust must be a “qualifying trust” as defined by the Texas Property and Tax Codes. Homeowners who want to place their homestead in a Trust should seek the guidance of an estate planning lawyer to ensure the trust is a “qualifying trust” under Texas law. Otherwise, the homeowner risks losing the homestead exemption and all the protections provided by law. Because these homestead protections are specific to Texas, anyone who created a Trust in another state and then later moves to Texas, should have their Trust agreement reviewed by a Texas estate planning lawyer.
10. What happens to my homestead exemption when I pass away?
A homestead right exists for the deceased homeowner’s surviving spouse, minor children, and adult children living in the home. This homestead right protects widows/widowers and surviving children from the general creditors of the deceased homeowner while the survivors reside in the home (for example, personal loans, credit card debt, medical debt, legal expenses, and even expenses of funeral). Additionally, a surviving spouse has the right to continue residing in the deceased homeowner’s designated homestead even if the homestead was only titled in the name of the deceased homeowner. The surviving spouse does not lose this homestead right if they remarry. The homestead right of the surviving spouse and/or children will continue until this right is deemed waived or abandoned. Abandonment occurs when the homestead has been totally and voluntarily abandoned with no intent to return and claim the homestead; in other words, the survivor moved out of the home with no intent to move back in. A survivor can also “waive” their homestead right by signing a document disclaiming their statutory homestead rights. Some pre-marital agreements may also act as a waiver of the surviving spouse’s homestead right. In some cases, a surviving spouse may want to waive, or even abandon their homestead rights. Although the homestead right may defeat claims of the deceased homeowner’s general creditors, it does not defeat the claims of a mortgage company or other loans secured by the residence. Finally, although a survivor may have a right of occupancy in the home, they will also have continuing financial obligations. At a minimum, a surviving spouse will be responsible for the upkeep and maintenance of the house, inclusive of the taxes and insurance and even the interest payments on a mortgage. This financial obligation will be greater, and include the principal payments of the mortgage if the homestead was the community property of the marriage and not the deceased homeowner’s separate property.
Although homestead laws in Texas may be generous, they are complex and give rights to occupants of the home who may not even be on title. When a homeowner is silent about their desires concerning their real estate, the survivors may be motivated to insert their own narrative about their relation to the deceased homeowner and their rights in a home once the homeowner dies. This can lead to complex and protracted probate proceedings, which ultimately delays the delivery of the inherited home or proceeds from the sale of the home to the legal heirs. Therefore, homeowners desiring to claim a homestead exemption should also visit with an estate planning attorney about the ultimate disposition of this important real estate interest upon their death to ensure that their home passes to their intended beneficiaries.
Have more questions about how to gift or transfer your homestead? Contact our office today to book your initial estate planning meeting!
