Homestead Rules in Texas

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The days of homesteading to acquire land are long gone, but in Texas, the word lives on as a form of asset protection for debtors and as a way to exempt residential land from property tax increases.

Ad Valorem Taxes

First, a word about the lesser-known aspect of Texas homesteading: Texas homesteaders who are older than 64 or disabled can have their property taxes frozen by filing for a homestead exemption. If you need a lawyer, using ad valorem, a Texas nickname for this particular aspect of homestead law, may help in a web search. Ad valorem is a broader legal term for taxes based on asset value.

Asset Protection

A debtor in Texas can homestead, and therefore keep safe from most creditors, up to 10 acres of urban land if it is her primary residence. With rural homesteads, a single person can keep up to 100 acres or a family can keep up to 200 acres -- again, as a primary residence. You can have an urban or rural homestead, but not both. If you homestead rural land and a city grows up around it, it's still considered a rural homestead.

The land doesn't have to be in a single parcel, and it doesn't have to have a house on it. You can file open land as a homestead as long as you clearly and with "overt acts," as one law firm puts it, establish your intent to live there.

You don't have to file your property as a homestead to protect assets from creditors. The legal conditions that demand homestead protection automatically trigger that protection.

Improvements Included

Homestead asset protections include all improvements on the land -- in general, structures, such as houses and barns, and fixtures, such as wells, septic systems and fences. Homestead protection doesn't include business assets, such that "personal" oil derrick in the ranch's back forty. Otherwise, in short, if the asset is nailed down, it's protected from creditors.

Assets that can't be nailed down -- say, cars, jewelry or livestock -- may be protected under Texas' personal property exemption laws, but cash and non-retirement financial assets may be seized.

Exceptions

The Internal Revenue Service or Texas authorities can force the sale of your homestead for tax delinquency, and certain mechanic's liens, home equity loans and reverse mortgages can defeat homestead protections.

You also may lose homestead protection by making an obvious attempt to commit fraud, such as trying to hide assets. Aside from such blunders, you can stave off creditors' efforts to prove intent to defraud simply by establishing Texas residency.

Texas Residency

You needn't live on your homestead for any specific number of years or even days to establish Texas residency as long as you show a clear intent to live there -- for example, by getting a voter registration card or a Texas driver's license. A driver's license, a utility bill or bank statement addressed to you at your Texas home is enough to prove residency.

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