Parker County Today August 2016 - Page 15

our law: COLUMN Understanding Homesteads in Texas By Stephanie E. Kaiser Partner, Puls Haney Kaiser PLLC W Texas law recognizes some exceptions to this rule, which are: purchase money debts; taxes; owelty of partition in a divorce proceeding; re-finance of an existing lien; certain improvements; home equity; reverse mortgage; and conversion and re-finance of a personal property lien on a manufactured home to a lien on real property. Proceeds from the sale of a homestead are likewise exempt for six months after the date of sale. There are some misconceptions about Texas homestead law. For example, if an individual lives in a leased apartment in the city but owns a weekend home in the country, then that individual’s homestead interest is his or her leasehold interest in the apartment and not in the weekend home, even though the individual only owns one home. Likewise, if an individual lives in a home in the country that is owned by a corporation, then the individual does not have a homestead interest in fee simple in that property. Because the corporation cannot have a homest ead interest, the lien restrictions, e.g., applicable to homesteads do not apply to that property. As a general rule, a homestead property can be pledged as collateral for the purchase of that property or for improvements made on that property. And, while homestead property may not be used to secure non-homestead debt, non-homestead property can be pledged as collateral for homestead debt (e.g., a commercial office building may be pledged as collateral for the purchase of a home). Understanding the limitations on, and exceptions to, homestead rights, can be important, depending upon the circumstances presented. Stephanie E. Kaiser represents clients in various litigation, corporate, banking, and bankruptcy matters. For additional information on Stephanie’s practice and Puls Haney Kaiser PllC, you may visit AUGUST 2016 PA R K E R C O U N T Y T O D AY hat constitutes a homestead in Texas is often misunderstood. In Texas, a rural homestead is 100 acres for an individual and 200 acres for a family and may be in one or more, noncontiguous rural parcels. An urban homestead is a lot or contiguous set of lots that total no more than 10 acres. A homestead is considered to be urban if, at the time the homestead designation is made, the homestead was located within the limits of a municipality or its extra-territorial jurisdiction or a platted subdivision, is served by police protection, has paid or volunteer fire protection, and at least three of the following services are provided by a municipality or under contract to a municipality: electric, natural gas, sewer, storm sewer, and water. A homestead is a rural homestead if it is not an urban homestead. Rural and urban homestead acreage may not be combined, and a homestead interest is not limited to a fee of simple interest; it can also include a leasehold or life estate interest, a beneficial interest in trust, and a spouse’s separate property, as well. A homestead is freely transferrable and can be abandoned if an individual or family stops using it as a home with the intent to permanently abandon it as the homestead. An individual or family cannot own two homesteads at the same. Therefore, if an individual or family owns and resides in two different homes, then the individual or family may designate one home as the homestead and disclaim any homestead interest in the other under certain circumstances. A homestead designation must accurately reflect the use of the home by the individuals and should not be used to exempt property in which an individual does not primarily live. Only an individual or a family can own a homestead; legal entities, such as limited liability companies and corporations, cannot. However, property that is transferred into certain revocable trusts created for estate-planning purposes can maintain homestead character in some cases. As a general rule, homesteads are exempt from forced sale for the payment of debts, which provides a great deal of protection to those who have homestead interests. 13