Set Aside Exempt Property

1. Set AsideExempt Property

2. 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.

3. 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

4. 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

5. 1. Homestead • How much is it worth? • No limit on value!

6. 1. Homestead • Creditor protection upon death • PC § 270 • EC § 102.004 • Condition = must be survived by either: • Surviving Spouse, or • Minor child

7. 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

8. 1. Homestead • Creditor protection upon death • Exceptions = homestead may be reached to pay these creditors: • Purchase money mortgage on homestead

9. 1. Homestead • Creditor protection upon death • Exceptions = homestead may be reached to pay these creditors: • Purchase money mortgage on homestead • Property taxes on homestead

10. 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

11. 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

12. 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)

13. 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

14. 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

15. 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

16. 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

17. 1. Homestead • Occupancy right of minor child • Until reach age 18. • Duties similar to those of a life tenant.

18. 1. Homestead • Title to homestead • Passes under will or to heirs regardless of who has the special occupancy right.

19. 2. Exempt personal property • Persons entitled: • Surviving spouse • Minor children • Unmarried adult children living at home • Adult incapacitated children

20. 2. Exempt personal property • Maximum exempt value • $60,000 • [if no family, while alive, $30,000]

21. 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

22. 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.

23. 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).

24. 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

25. 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.

26. 4. Family Allowance • Condition • Entitled individuals cannot have property of their own adequate for support.

27. 4. Family Allowance • Amount • Amount needed to support entitled individuals for one year after the decedent’s death. • Thus, depends on the facts.

28. 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.

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