Set Aside

Exempt Property

1. Homestead

Two types of possible protections:

Against being reached to pay the claims of most creditors.

Ability of surviving spouse and minor children to occupy the homestead.

1. Homestead

What is it? The home you own in which you live▪ Renters do not have homestead rights.

Size▪ Rural = 200 acres (family), 100 acres

(non-family)▪ Can be separate parcels

▪ Urban = 10 acres▪ Must be contiguous parcels

1. Homestead

How big is it?

Rural = 200 acres (family), 100 acres (non-family)▪ Can be separate parcels

Urban = 10 acres▪ Must be contiguous parcels

1. Homestead

How much is it worth?

No limit on value!

1. Homestead

Creditor protection upon death PC § 270 EC § 102.004

Condition = must be survived by either:▪ Surviving Spouse, or▪ Minor child

1. Homestead

Creditor protection upon death General Rule = homestead cannot

be used to pay most of the decedent’s creditors:▪ Credit cards▪ Utilities▪ Tort claims▪ Contract claims▪ Student loans▪ Article 9 creditors

1. Homestead

Creditor protection upon death Exceptions = homestead may be

reached to pay these creditors:▪ Purchase money mortgage on

homestead

1. Homestead

Creditor protection upon death Exceptions = homestead may be

reached to pay these creditors:▪ Purchase money mortgage on

homestead▪ Property taxes on homestead

1. Homestead

Creditor protection upon death Exceptions = homestead may be

reached to pay these creditors:▪ Purchase money mortgage on

homestead▪ Property taxes on homestead▪ Improvements on homestead

1. Homestead

Creditor protection upon death Exceptions = homestead may be

reached to pay these creditors:▪ Purchase money mortgage on

homestead▪ Property taxes on homestead▪ Improvements on homestead▪ Owelty of partition upon divorce

1. Homestead

Creditor protection upon death Exceptions = homestead may be

reached to pay these creditors:▪ Purchase money mortgage on

homestead▪ Property taxes on homestead▪ Improvements on homestead▪ Owelty of partition upon divorce▪ Federal tax lien (e.g., unpaid income

taxes)

1. Homestead

Creditor protection upon death Exceptions = homestead may be

reached to pay these creditors:▪ Purchase money mortgage on

homestead▪ Property taxes on homestead▪ Improvements on homestead▪ Owelty of partition upon divorce▪ Federal tax lien (e.g., unpaid income

taxes)▪ Refinancing of above liens

1. Homestead

Creditor protection upon death Exceptions = homestead may be

reached to pay these creditors:▪ Purchase money mortgage on homestead▪ Property taxes on homestead▪ Improvements on homestead▪ Owelty of partition upon divorce▪ Federal tax lien (e.g., unpaid income

taxes)▪ Refinancing of above liens▪ Certain home equity loans

1. Homestead

Creditor protection upon death Exceptions = homestead may be

reached to pay these creditors:▪ Purchase money mortgage on homestead▪ Property taxes on homestead▪ Improvements on homestead▪ Owelty of partition upon divorce▪ Federal tax lien (e.g., unpaid income

taxes)▪ Refinancing of above liens▪ Certain home equity loans▪ Certain reverse mortgages

1. Homestead

Occupancy right of surviving spouse Until abandonment or death,

whichever comes first. Can live in homestead with a new

partner! Duties similar to those of a life

tenant▪ Pay property taxes▪ Maintain home▪ Pay interest on mortgage

1. Homestead

Occupancy right of minor child Until reach age 18. Duties similar to those of a life

tenant.

1. Homestead

Title to homestead Passes under will or to heirs

regardless of who has the special occupancy right.

2. Exempt personal property

Persons entitled: Surviving spouse Minor children Unmarried adult children living at

home Adult incapacitated children

2. Exempt personal property

Maximum exempt value $60,000 [if no family, while alive, $30,000]

2. Exempt personal property

Property exempt under Prop. Code § 42.002: Home furnishings and heirlooms Food Clothes Jewelry (not to exceed 25%) 2 firearms Sporting equipment Car or motorcycle for each family member Specified animals (12 cows, 120 birds, 2 horses,

pets) Life insurance surrender value Current wages Many others

2. Exempt personal property

If Estate is Insolvent PC § 279 EC § 353.153

The exempt property claimants take title to the property free and clear of creditors, heirs, and beneficiaries.

2. Exempt personal property

If Estate is Solvent PC § 278 EC § 353.152

The exempt property passes to the heirs and beneficiaries (not the exempt property claimants).

3. Allowances in Lieu of Exempt Property

Homestead PC § 273 = $15,000 EC § 353.053 = $45,000 as of 1/1/14

Exempt personal property PC § 273 = $5,000 EC § 353.053 = $30,000 as of 1/1/14

4. Family Allowance

Entitled Individuals PC § 286 EC § 353.101

1. Surviving spouse 2. Minor children 3. Disabled children but, as of 1/1/14, only

if decedent was actually caring for the child.

No allowance for adult child who still lives at home.

4. Family Allowance

Condition Entitled individuals cannot have

property of their own adequate for support.

4. Family Allowance

Amount Amount needed to support entitled

individuals for one year after the decedent’s death.

Thus, depends on the facts.

4. Family Allowance

Amount Amount received does not reduce

intestate share or gift under the will. Not treated as advancement or

satisfaction. Treated as a debt of the estate which

has significant priority.

4. Family Allowance

In re Estate of Rhea, 257 S.W.3d 787 (Tex. App. – Fort Worth 2008, no pet.).