Houston Real Estate Market Continues to Rise
November 22, 2014
Houston Estate Planning for Out-of-State Property
November 26, 2014
In Texas, your primary residence is protected under the state constitution. Texas has an unlimited homestead exemption with respect to your general creditors, which means that your home is protected from most general creditors regardless of its value. However, homestead exemption is not available against certain creditors, such as a bank that has extended you a loan and used the home as collateral, as is the case when you finance the purchase of your home or when you take out a home equity loan. Additionally, your home is not an exempt assets with respect to unpaid taxes, such as state or local property taxes or federal income tax (i.e., the IRS).
If your residence qualifies as a homestead under the Texas law, you are entitled to certain exemptions. For instance, there is a cap on the annual increase in value to your home that can occur for property tax purposes. The cap for a homestead is the lesser of (1) the market value of the property, or (2) 110% of the previous year’s appraised value. This cap is especially important in areas such as Houston, where the values of residential properties have increased dramatically in recent years.
One question my Houston clients often ask is whether their home can be placed in a Texas revocable trust and still qualify for the homestead exemption for property tax purposes. The answer is yes, as long as the trust is a “qualifying trust”, which means that it meets the statutory requirements set forth in the Texas Property Code.
Generally speaking, your residence is not included as an asset when determining your eligibility for Medicaid in Texas. However, if your Texas residence is placed in a revocable living trust, it is a countable asset and will almost always result in your disqualification for Medicaid long-term care benefits. This can be easily corrected by transferring the property out of the trust and back to the owner(s), or perhaps by the completion of a ladybird deed, so you should speak to your Houston estate planning attorney to find out what solution is appropriate in y0ur specific situation.
