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How Dying intestate in Texas affects your Houston estate plan
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As a Houston estate planning and probate lawyer, I am often asked questions from clients and prospective clients about how they can protect their assets. This is especially important for retirees in Texas, who may have limited resources after they stop working. For these Texans, asset protection is especially important. While there is no magic technique that will protect all of your assets, you do have a fair amount of protection under Texas law concerning your assets, regardless of whether you are retired. Here are a few of the assets that are protected in Texas for retirees and the employed alike:
Homestead. Texas has an unlimited homestead exemption, which means that no matter how valuable your home is, general creditors cannot get to it to satisfy any debt that you owe. Some important exceptions for this are (1) If you have a mortgage, the mortgage company can foreclose on your home if you fail to make the payments as required under your mortgage, (2) The IRS can take your home if you fail to meet your income tax obligations, and (3) the local taxing authorities can foreclose on your property if you fail to pay your property taxes. There is a limit as to the size of the property that may qualify for the homestead exemption, depending on whether it is located in a rural or urban location.
Retirement Plans. Your 401(k) plans and Individual Retirement Accounts (IRAs) are protected from creditors under Texas law. This means that your general creditors cannot reach your retirement assets. However, once you withdraw money from the plan, the money withdrawn will generally be subject to the claims of your creditors, unless the funds are used for certain exempt purposes.
Life Insurance. Life insurance policies, including the cash value of the policy, are generally protected assets. These assets, like retirement plans, pass via beneficiary designation. You should be aware that if your estate is the beneficiary of your life insurance or retirement plan, the proceeds from the policy or plan will be subject to the creditors of your estate when you die. For this reason, it is important that you update your beneficiary designations to make sure your estate is not the beneficiary, unless this is your desired result (which is rarely the case).
Personal Property. Texas Property Code protects certain assets from creditors up to an aggregate value of $60,000 for a family or $30,000 for an individual. The statute contains a list of the specific types of property that are exempt.
Wages. Wages received for personal services are exempt from garnishment, except for enforcement of court-ordered child support payments. However, this only prevents the employer from having to withhold wages from the employee. Once the employee receives the wages, they are subject to the claims of creditors unless otherwise exempt. Additionally, unpaid commissions and unemployment compensation are also protected assets in Texas.
Whether you are a retiree or a young person with a lifetime of earning potential ahead, you do have certain protections when it comes to your assets in Texas. This blog post is not meant to be an exhaustive discussion on asset protection, and there are several more types of exempt assets, as well as some strategies to protect your assets. For more information, you should speak to a Houston estate planning lawyer.
