Like many states, Texas has special laws that apply to property used as a person’s primary residence (homestead). These provisions have their roots in Section 50 and 51 of Article XVI of the Texas Constitution and are reflected in various provision of the Texas Family Code, Texas Property Code, and Texas Tax Code.
It is important to understand the consequences of Texas homestead status when receiving transferring a Texas homestead by deed. Failure to do so could cause the deed to be invalid. Designating Texas real estate as a homestead has four important legal consequences.
Spouse’s Signature Required to Sell Property
In almost all cases, a spouse’s signature is required to convey Texas homestead property. Section 5.001 of the Texas Family Code provides:
SALE, CONVEYANCE, OR ENCUMBRANCE OF HOMESTEAD. Whether the homestead is the separate property of either spouse or community property, neither spouse may sell, convey, or encumber the homestead without the joinder of the other spouse except as provided in this chapter or by other rules of law.
This means that the signature of both spouses is required even if the homestead is one spouse’s separate property. A deed of a Texas homestead that contains the signature of only one spouse is invalid.
There are exceptions to this rule, but most of them are limited to incapacity of the surviving spouse (as determined by a court) or unusual circumstances like disappearance or abandonment. Usually, both spouses must sign the deed.
Exclusive Right of Occupancy After Spouse’s Death
Upon the death of a spouse, the surviving spouse has the exclusive right to occupy the Texas homestead for as long as he or she chooses to do so. This right is given by Section 52 of Article XVI of the Texas Constitution, which provides:
[The homestead] shall not be partitioned among the heirs of the deceased during the lifetime of the surviving husband or wife, or so long as the survivor may elect to use or occupy the same as a homestead, or so long as the guardian of the minor children of the deceased may be permitted, under the order of the proper court having the jurisdiction, to use and occupy the same.
The spouse’s exclusive right to occupy the marital home applies regardless of the provisions of the deceased spouse’s will or Texas intestacy law. It exists regardless of whether the marital home is the couple’s community property or the separate property of the deceased spouse. This creates strong rights in the surviving spouse.
Property Tax Exemption for Texas Homestead
Because Texas has no state income tax, property taxes are the primary source of revenue for local governments. Local governments use property taxes to pay for schools, roads, police and firemen, emergency response services, libraries, parks and other services.
Section 11.13 of the Texas Tax Code provides a property tax exemption for property that qualifies as Texas homestead. Texas homestead tax exemptions can be total or partial. A total exemption removes the entire property’s value from tax exemption, but these are not common. The tax exemption for Texas homestead is usually a partial exemption of $25,000 of the property’s value. Given that most counties in Texas levy taxes at 2 to 3 percent of the property’s value, the $25,000 property tax exemption usually saves between $500 and $750 in taxes.
Local taxing authorities may decide locally to offer a separate residence homestead exemption of up to 20 percent of a property’s appraised value. The local option exemption cannot be less than $5,000.
Creditor Protection for Texas Homestead
Unlike the property tax exemption, creditor protection laws for Texas homesteads are very generous. Section 41.001 of the Texas Property Code provides an unlimited homestead exemption for most types of debts other than:
- purchase money;
- taxes on the property;
- work and material used in constructing improvements on the property if contracted for in writing;
- an owelty of partition imposed against the entire property by a court order or by a written agreement of the parties to the partition, including a debt of one spouse in favor of the other spouse resulting from a division or an award of a family homestead in a divorce proceeding;
- the refinance of a lien against a homestead, including a federal tax lien resulting from the tax debt of both spouses, if the homestead is a family homestead, or from the tax debt of the owner;
- certain equity loans; or
- reverse mortgages.
There are a few other categories (hazardous remediation costs, Medicaid recover), but Texas homestead is largely protected from most types of third-party debts.
What is a Texas Homestead?
Homestead is defined in Section 41.002 of the Texas Property Code. The amount of land that may be claimed as homestead depends on whether it is urban or rural.
- Urban Homesteads – If the home is urban or is used as a place for a home-business, the homestead covers up to 10 acres of land and any improvements on the land.
- Rural Homesteads – If the home is rural, homestead may include 200 acres for a family or 100 acres for a single person.
A homestead is considered urban if it is within the limits of a municipality or its extraterritorial jurisdiction or a platted subdivision and served by local governmental services (police and fire, for example) provided by a municipality or contractor of a municipality. Otherwise, the homestead is rural.
Section 41.002 does not define the word “home.” Whether a property is a home is a matter of intent that, in extraordinary circumstances, may be difficult to determine. But in the typical situation where a person or married couple lives on the property, homestead status is easily determined. Texas law also allows for filing an affidavit to designate property as homestead in the land records.