The Texas Homestead Exemption and Your Estate Plan

The Texas Homestead Exemption and Your Estate Plan

Your home is probably your most valuable asset—and in Texas, it gets a level of legal protection that most other states can't match. The Texas homestead exemption shields your primary residence from most creditors, keeps property taxes manageable, and provides important rights for your surviving spouse and children. But here's the catch: if your estate plan isn't set up correctly, you could accidentally lose some of those protections.

At Dickey Law Group, we help families in The Woodlands understand how the homestead exemption fits into their bigger estate planning picture. Let's walk through what you need to know.

What the Homestead Exemption Actually Protects

Under the Texas Property Code and the Texas Constitution, your homestead is protected from forced sale by most creditors. That means if someone sues you and wins a judgment, they generally can't take your home. This protection applies to up to 10 acres in an urban area or up to 200 acres in a rural area for a family (100 acres for a single adult).

There are a few exceptions—your mortgage lender, the taxing authority, mechanics' lien holders, and home equity lenders can still force a sale. But the general rule is powerful: your home is off-limits to most creditors.

The exemption also provides property tax benefits. In Texas, you can claim a $100,000 homestead exemption on your school district taxes, plus additional exemptions if you're over 65 or disabled. These tax savings add up significantly over time.

Homestead Rights for Surviving Spouses and Children

This is where estate planning and homestead protections intersect in a big way. Under Section 102.006 of the Texas Estates Code, a surviving spouse has the right to occupy the homestead for life—even if the will says otherwise. Minor children have a similar right.

What does that mean in practice? If your will leaves your house to your adult children from a previous marriage, your surviving spouse can still live there. That can create serious family tension, especially in blended families. It's not uncommon for adult children to want to sell the property while the surviving spouse wants to stay put.

These homestead rights exist to protect vulnerable family members. But they can create conflicts if you haven't planned for them.

How the Homestead Exemption Interacts with Trusts

Many estate plans include a revocable living trust to avoid probate. But transferring your home into a trust raises an important question: do you lose your homestead protection?

The good news is that Texas courts have generally held that transferring your home to a revocable living trust does not eliminate your homestead exemption—as long as you continue to live in the home and the trust is set up properly. The key is that you, as the grantor, must retain the right to live in the home and control the trust during your lifetime.

However, this isn't a guarantee. If the trust language is poorly drafted, or if you transfer the home to an irrevocable trust without proper planning, you could jeopardize your homestead protection. This is one area where cutting corners or using a generic online form can cost you dearly.

Common Mistakes That Threaten Your Homestead Protection

We see several recurring mistakes at our firm:

• Transferring the home to an LLC or corporation — Business entities don't get homestead protection in Texas. If you move your home into an LLC for liability protection, you've just stripped away your homestead exemption.
• Failing to update your homestead designation after moving — The exemption applies to the property you actually live in. If you move and don't update your records, you could lose protection on your new home.
• Incorrectly drafted trust language — A trust that doesn't preserve your right to occupy the home can put your exemption at risk.
• Ignoring homestead rights in blended families — If you don't account for your spouse's homestead rights in your estate plan, your children and spouse could end up in a legal dispute after you pass away.
• Not claiming your property tax exemption — This won't affect your creditor protection, but it costs you money every year. File the exemption with your county appraisal district.

Making Homestead Protection Part of Your Estate Plan

The best approach is to think about your homestead protection as one piece of your overall estate plan. When we work with clients, we look at how the homestead exemption, your will, your trust, and your beneficiary designations all work together.

For example, if you're in a blended family, we might recommend a life estate or a trust that gives your spouse the right to live in the home during their lifetime while ensuring the property eventually passes to your children. That way, everyone's interests are protected, and there's no ambiguity.

If you own rural property in addition to your primary residence, we'll make sure both are properly designated and protected under Texas law.

Contact Dickey Law Group today to schedule a consultation. We serve families throughout The Woodlands, Spring, Conroe, and the Houston metro area. Call (832) 521-4414.