In Texas, the term “homestead” refers to a house or other residential structure you own, including improvements and up to 10 acres where the structure sits for urban homesteads. For rural homesteads, this limitation on size is 100 acres for a single adult and 200 acres for a family. Put simply, a homestead is a structure designed and used for residence by its owner(s) as a main residence.
Under Texas law, a decedent’s homestead is afforded significant protection if the decedent is survived by his or her surviving spouse, including protection from claims of certain creditors of the decedent. Where there is no family home, a Texas Probate Court is required to set aside an allowance in lieu of a homestead, not to exceed $45,000. Tex. Estates Code § 353.053(b).
How to qualify as a homestead?
There are several exemptions for residences that qualify as a homestead, including exemptions from assessment in valuation as well as protection from increases in valuation for property tax purposes. Under the “homestead cap,” the annual increase of the appraised value of a residential homestead property is limited to 10% more than the previous year’s appraised value including improvements.
(Previous Yr. Value of Property) + (10%) + (Any New Improvements)
= Current Appraisal Value of Homestead Property
To qualify for the Homestead Exemption under Texas Law, you must have a whole or partial ownership interest in the property (e.g., cannot be owned by a corporation or other business entity), and the property must be used as your primary residence. Additionally, you must state that you do not claim an exemption on another residential homestead in or outside of the state of Texas.
How to ensure to keep your home’s exempt status?
One way to ensure that your home will not lose its exempt status at your death is to put your home into a qualifying trust. A qualifying trust must give the beneficiary—typically, the surviving spouse—the right to use and occupy the home, rent free and without charge except for taxes and other costs provided for in the trust instrument. This exclusive right of occupancy is given to the surviving spouse so long as he or she chooses to use the home as their primary residence, or it is given to the surviving spouse for life, for a set terms of years, or until the trust is revoked or amended. Further, the surviving spouse’s right to occupy exists whether the home is separate property of the decedent spouse or is marital community property.
Texas affords some of the most protective homestead rights and exemptions in the country, and thus it is crucial to consult an experienced estate planning attorney to ensure that these benefits are utilized for your own home.