Levi, Don

Ryan, Sarah

English

Texas A&M University

L-1749
REALESTATEMENT:
HOMESTEAD RIGHTS IN TEXAS
Don Levi and Sarah Ryan*
When a couple acquires a homestead, certain legal
rights automatically arise. A basic purpose of these
"homestead rights" is to protect the family homestead
from creditors. Because homestead rights are a part of
real property law, it is important that persons pur-
chasing real estate be familiar with them.
What Are Homestead Rights?
There are two different homestead rights. These
rights are referred to as a "lifetime homestead" and a
"probate homestead." Thus, it is important to identify
which type of homestead is being discussed.
Basically, probate homestead rules give a surviv-
ing widow or widower the right to occupy the family
homestead for the remainder of her or his life, regard-
less of who inherits title to the property upon the
death of the first spouse. Probate homestead occu-
pancy rights also extend to minor children. The right
of life occupancy continues as long as the person(s)
asserting the right continues actual occupancy.
Lifetime homestead rights protect the family
homestead from the claims of both secured and unse-
cured creditors during marriage, except in three spe-
cific circumstances. These rights extend to a widow,
to minor children and to unmarried daughters living
with the decedent at the time of death.
*Professor, Department of Finance, The Texas A&M University
System, and Attorney at Law; Attorney at Law.
Unless a creditor falls within one of three
categories, he cannot force the homestead to be sold
to collect debts owed him. In addition, the homestead
cannot be mortgaged unless it falls within one of three
circumstances:
1. to acquire initial purchase money to finance the
purchase of the homestead;
2. to acquire money to pay ad valorem (property)
taxes due on the homestead; or
3. to finance permanent and valuable im-
provements to the homestead.
While homestead property can be refinanced at a
later date if, for example, interest rates become more
favorable, the "burden" (amount of outstanding loan)
on the homestead cannot be increased unless such
increase is to cover the cost of permanent and valu-
able improvements or property taxes (and, though not
specified by state law, a federal income tax lien). Le-
gally, conveying the homestead to a third party (some-
times called a straw party) and then back to the origi-
nal owner is ineffective if the substance of the transac-
tions is to create a mortgage of the homestead for a
purpose forbidden by law.
For creditors to have a valid lien against the prop-
erty when permanent and valuable improvements are
being added to it, the Texas Constitution requires
contracts for the labor and materials to be in writing
and signed by both spouses in the same manner which
would be required if they were conveying title to the
property. For a mechanic's lien so created to be effec-
tive, it must be recorded in the county in which the
property is located.
As a general rule, once a homestead is created it
continues until another homestead is acquired. It does
not necessarily terminate just because the family tem-
porarily lives at another location.
'38.25
Texa Agricultural Extension Service • The Texas A&M University System. Daniel C. Pfannstlel, DIrector. College Station, Texas
Homestead rights also ensure that one spouse
cannot sell the homestead without the other's con-
sent. Thus, both spouses must sign a deed to convey
the homestead.
If a spouse dies, the homestead cannot be par-
titioned (physically divided) among his or her heirs so
long as the other spouse survives, or so long as the
guardian of any minor children is permitted by court
order to live on the homestead. This right against
partition does not extend to unmarried daughters liv-
ing at home who have reached the age of majority. In
either case, the homestead may be partitioned among
the heirs if the surviving spouse sells his or her inter-
est or elects to move from the homestead.
If a surviving spouse remarries, the homestead
right still applies so long as he or she continues to
occupy or use the homestead.
Finally, if the homestead is sold for cash, the
money received retains its homestead character for a
period of six month. If one homestead is exchanged
for another, creditors likewise cannot reach the new
homestead. Of course, one must be able to trace the
funds from the sale of one homestead to the purchase
of the subsequent one.
As a general rule, a lender cannot rely upon an
owner's statement that a given tract of land is not his
homestead. However, if his statement is consistent
with observable physical factors, the owner will likely
be prevented from denying that this tract is his
homestead. Clearly then, such statements may be
important to lenders and may affect lending decisions.
How Are Homestead Rights Acquired?
Traditionally, homestead rights have been estab-
lished when a family acquired a possessory interest in
real estate. In most cases this possessory interest has
involved ownership ofland, with the family occupying
a home on it.
Until recently homestead rights could arise only
for "families." Legally, a "family" exists any time two
or more people live together under circumstances giv-
ing rise to a moral or legal obligation of support. Con-
versely, the family members depend upon the head of
the family for support. Under this definition it is pos-
sible for homestead rights to exist even where a
couple is living together but unmarried.
Under another recent change in the law it is now
possible for a single person (i. e., an unmarried person
not a constituent of a family) to establish a lifetime (but
not a probate) homestead.
Urban Ys. Rural Homesteads
Obviously, an important question is "How much
of a family's real property is subject to homestead
rights?" Here the answer varies, depending upon
whether rural or urban property is involved. As a
general rule a family can have either a rural or an
urban homestead, but not both. The test to determine
whether the rural or urban rules apply is whether or
not the homestead is located in a "built-up area."
A rural homestead may consist of not more than
200 acres (100 acres for a single unmarried person
who is not a part of a family). Homestead rules permit
creditors to reach acreage in excess of this amount.
The homestead may consist of more than one tract
although it must contain the family home. oncon-
tiguous tracts need not be located in the same area,
but to qualify as part of the homestead they must be
used for family purposes. Homestead rights attach to
both the land and all permanent improvements
thereon, thereby effectively insulating a sizeable
value of property in many cases.
For an urban homestead, the limiting factor is the
value at the time of acquisition of the raw land in-
volved (rather than physical quantity). The urban
homestead can consist of contiguous or noncontiguous
tracts, one of which ordinarily will contain the family
residence, so long as the initial value of all raw land
does not exceed $10,000. Once more, this allows a
sizeable value of property to be protected under
homestead rights because the protection extends to all
bUildings and other fixtures permanently attached to
the land. Thus, for example, ifone purchased a home
and lot for $100,000 in which the lot was valued at
$10,000 and the house at $90,000, the entire $100,000
would be protected from all creditors except those
fitting within the three classifications previously set
out.
An urban homestead can also consist wholly or
partially of business property. If partially, the busi-
ness must be located in the same "built-up area" as
the residence. A business homestead can be a part of
the urban homestead only if it is the place where the
head of the family pursues his or her principal busi-
ness.
The Homestead and Property Tax
Although not directly related to the lifetime and
probate homestead rights, another benefit of owning a
homestead is that the state and/or county property tax
burden may be lessened. Recent changes in tax law
have created more benefits for homestead owners. All
residential homestead owners who qualify and whose
residences qualify may receive an exemption from
school taxes of $5,000 from the assessor's appraised
value. In addition, a homestead owner over the age of
65 or who is disabled may receive an additional
exemption from school taxes of $10,000 from the as-
sessor's appraised value, and the total school tax as-
sessment on their homestead may not be increased as
long as that owner retains the property or until im-
provements are made.
Additional homestead tax exemptions may be
available in some taxing jurisdictions. These vary and
generally require annual filing for qualification. Prop-
erty owners should check with local taxing authorities
to find out which exemptions are available and how to
file for them.
Educational programs conducted by the Texas Agricultural Extension Service serve people ofaU ages regardless ofsocio-economic level, race,
color, sex, religion or national origin.
Cooperative Extension Work in Agriculture and Home Economics, The Texas A&M University System and the United States Department of
Agriculture cooperating. Distributed in furtherance of the Acts of Congress of May 8, 1914, as amended, and June 30, 1914.
3M - 9-79, ew RD


Realestatement:  Homestead Rights in Texas.

Texas A&amp;M Repository

L-1749REALESTATEMENT:HOMESTEAD RIGHTS IN TEXASDon Levi and Sarah Ryan*When a couple acquires a homestead, certain legalrights automatically arise. A basic purpose of these"homestead rights" is to protect the family homesteadfrom creditors. Because homestead rights are a part ofreal property law, it is important that persons pur-chasing real estate be familiar with them.What Are Homestead Rights?There are two different homestead rights. Theserights are referred to as a "lifetime homestead" and a"probate homestead." Thus, it is important to identifywhich type of homestead is being discussed.Basically, probate homestead rules give a surviv-ing widow or widower the right to occupy the familyhomestead for the remainder of her or his life, regard-less of who inherits title to the property upon thedeath of the first spouse. Probate homestead occu-pancy rights also extend to minor children. The rightof life occupancy continues as long as the person(s)asserting the right continues actual occupancy.Lifetime homestead rights protect the familyhomestead from the claims of both secured and unse-cured creditors during marriage, except in three spe-cific circumstances. These rights extend to a widow,to minor children and to unmarried daughters livingwith the decedent at the time of death.*Professor, Department of Finance, The Texas A&M UniversitySystem, and Attorney at Law; Attorney at Law.Unless a creditor falls within one of threecategories, he cannot force the homestead to be soldto collect debts owed him. In addition, the homesteadcannot be mortgaged unless it falls within one of threecircumstances:1. to acquire initial purchase money to finance thepurchase of the homestead;2. to acquire money to pay ad valorem (property)taxes due on the homestead; or3. to finance permanent and valuable im-provements to the homestead.While homestead property can be refinanced at alater date if, for example, interest rates become morefavorable, the "burden" (amount of outstanding loan)on the homestead cannot be increased unless suchincrease is to cover the cost of permanent and valu-able improvements or property taxes (and, though notspecified by state law, a federal income tax lien). Le-gally, conveying the homestead to a third party (some-times called a straw party) and then back to the origi-nal owner is ineffective if the substance of the transac-tions is to create a mortgage of the homestead for apurpose forbidden by law.For creditors to have a valid lien against the prop-erty when permanent and valuable improvements arebeing added to it, the Texas Constitution requirescontracts for the labor and materials to be in writingand signed by both spouses in the same manner whichwould be required if they were conveying title to theproperty. For a mechanic's lien so created to be effec-tive, it must be recorded in the county in which theproperty is located.As a general rule, once a homestead is created itcontinues until another homestead is acquired. It doesnot necessarily terminate just because the family tem-porarily lives at another location.'38.25Texa Agricultural Extension Service • The Texas A&M University System. Daniel C. Pfannstlel, DIrector. College Station, TexasHomestead rights also ensure that one spousecannot sell the homestead without the other's con-sent. Thus, both spouses must sign a deed to conveythe homestead.If a spouse dies, the homestead cannot be par-titioned (physically divided) among his or her heirs solong as the other spouse survives, or so long as theguardian of any minor children is permitted by courtorder to live on the homestead. This right againstpartition does not extend to unmarried daughters liv-ing at home who have reached the age of majority. Ineither case, the homestead may be partitioned amongthe heirs if the surviving spouse sells his or her inter-est or elects to move from the homestead.If a surviving spouse remarries, the homesteadright still applies so long as he or she continues tooccupy or use the homestead.Finally, if the homestead is sold for cash, themoney received retains its homestead character for aperiod of six month. If one homestead is exchangedfor another, creditors likewise cannot reach the newhomestead. Of course, one must be able to trace thefunds from the sale of one homestead to the purchaseof the subsequent one.As a general rule, a lender cannot rely upon anowner's statement that a given tract of land is not hishomestead. However, if his statement is consistentwith observable physical factors, the owner will likelybe prevented from denying that this tract is hishomestead. Clearly then, such statements may beimportant to lenders and may affect lending decisions.How Are Homestead Rights Acquired?Traditionally, homestead rights have been estab-lished when a family acquired a possessory interest inreal estate. In most cases this possessory interest hasinvolved ownership ofland, with the family occupyinga home on it.Until recently homestead rights could arise onlyfor "families." Legally, a "family" exists any time twoor more people live together under circumstances giv-ing rise to a moral or legal obligation of support. Con-versely, the family members depend upon the head ofthe family for support. Under this definition it is pos-sible for homestead rights to exist even where acouple is living together but unmarried.Under another recent change in the law it is nowpossible for a single person (i. e., an unmarried personnot a constituent of a family) to establish a lifetime (butnot a probate) homestead.Urban Ys. Rural HomesteadsObviously, an important question is "How muchof a family's real property is subject to homesteadrights?" Here the answer varies, depending uponwhether rural or urban property is involved. As ageneral rule a family can have either a rural or anurban homestead, but not both. The test to determinewhether the rural or urban rules apply is whether ornot the homestead is located in a "built-up area."A rural homestead may consist of not more than200 acres (100 acres for a single unmarried personwho is not a part of a family). Homestead rules permitcreditors to reach acreage in excess of this amount.The homestead may consist of more than one tractalthough it must contain the family home. oncon-tiguous tracts need not be located in the same area,but to qualify as part of the homestead they must beused for family purposes. Homestead rights attach toboth the land and all permanent improvementsthereon, thereby effectively insulating a sizeablevalue of property in many cases.For an urban homestead, the limiting factor is thevalue at the time of acquisition of the raw land in-volved (rather than physical quantity). The urbanhomestead can consist of contiguous or noncontiguoustracts, one of which ordinarily will contain the familyresidence, so long as the initial value of all raw landdoes not exceed $10,000. Once more, this allows asizeable value of property to be protected underhomestead rights because the protection extends to allbUildings and other fixtures permanently attached tothe land. Thus, for example, ifone purchased a homeand lot for $100,000 in which the lot was valued at$10,000 and the house at $90,000, the entire $100,000would be protected from all creditors except thosefitting within the three classifications previously setout.An urban homestead can also consist wholly orpartially of business property. If partially, the busi-ness must be located in the same "built-up area" asthe residence. A business homestead can be a part ofthe urban homestead only if it is the place where thehead of the family pursues his or her principal busi-ness.The Homestead and Property TaxAlthough not directly related to the lifetime andprobate homestead rights, another benefit of owning ahomestead is that the state and/or county property taxburden may be lessened. Recent changes in tax lawhave created more benefits for homestead owners. Allresidential homestead owners who qualify and whoseresidences qualify may receive an exemption fromschool taxes of $5,000 from the assessor's appraisedvalue. In addition, a homestead owner over the age of65 or who is disabled may receive an additionalexemption from school taxes of $10,000 from the as-sessor's appraised value, and the total school tax as-sessment on their homestead may not be increased aslong as that owner retains the property or until im-provements are made.Additional homestead tax exemptions may beavailable in some taxing jurisdictions. These vary andgenerally require annual filing for qualification. Prop-erty owners should check with local taxing authoritiesto find out which exemptions are available and how tofile for them.Educational programs conducted by the Texas Agricultural Extension Service serve people ofaU ages regardless ofsocio-economic level, race,color, sex, religion or national origin.Cooperative Extension Work in Agriculture and Home Economics, The Texas A&M University System and the United States Department ofAgriculture cooperating. Distributed in furtherance of the Acts of Congress of May 8, 1914, as amended, and June 30, 1914.3M - 9-79, ew RD

https://oaktrust.library.tamu.edu/bitstream/1969.1/172758/2/1749/Leaf1749.pdf

Realestatement: Homestead Rights in Texas.

Abstract

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Texas A&M University

Texas A&M Repository

Realestatement: Homestead Rights in Texas.

Abstract

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Full text

Available Versions

Texas A&M University

Texas A&amp;M Repository

Texas A&M Repository