TEXAS HOMESTEAD AND PROBATE LAW

May 14, 2015TEXASHOMESTEAD ANDPROBATE LAWJonathan D. BaughmanMcGinnis LochridgeHouston, Texas

Why Homestead Matters2

Why Homestead Matters3

Background/Basics4

Texas Homestead Law5

Homestead The Texas Constitution (Article 16, Section 51). Texas Statutes:– Property Code– Probate Code– Family Code– Tax Code6

Homestead Exemption If validly established, homestead(real property) is protected from forced saleby general creditors7

Historical Purpose– Preserve family– Provide debtor with a home and means to supporthis or her family– Prevent family from becoming a “public burden”8

Claims EnforceableAgainst the Homestead Purchase money liensLiens for improvementsTax liens (ad valorem and federal)Home equity liensReverse mortgagesPreviously recorded liensLien secured by manufactured home9

Presumptions Liberally construed to protect the homestead Once established, homestead is presumed tocontinue Burden of proof is on partyasserting termination orabandonment10

Homestead Homestead created by:– Overt acts of usage and– Intent to claim real property as permanentresidence Must have right to possessionNo requirement that the property be occupiedby the party claiming the homestead Do not have to have ownership in fee11

Establishing the Homestead—In General Use must be by thehomestead claimantor a member of thefamily12

Homestead Rights Can only have one homestead.– i.e. can only have a rural or an urban homestead.Cannot have both Must have present right to possession Cannot be solely future interests13

Property Interest Homestead cannot exist without interest inreal property– Exception:Spouse can claimHomestead rights inSeparate property ofOther Spouse14

HomesteadWHO CAN POSSESS HOMESTEAD RIGHT?15

Possessor of Homestead Family Homestead“Single Adult” HomesteadSurviving Spouse HomesteadSurviving Minor Children16

Family Homestead The “Family” Homestead– Definition of “Family.” Social Status of Family Duty to Support State of Dependence– Effect of Death/Divorce/Marriage17

Social Status of Family Husband and wife Single grandparent, grandparent’s adultmarried child, and minor grandchild Adult child and parent Brother and sister Divorced parent and minor child Grandparents and grandchildren Widower with no dependent children18

“Single Adult” Homestead Established in 1973 by the Texas Constitution Limited to 10 acres for Urban Homestead and100 acres for Rural Homestead Does not apply if separated but not divorced19

Surviving Spouse Homestead Probate Code:– Homestead property shall “descend and vest inlike manner as other real property of thedeceased”– Surviving spouse entitled to retain a survivor’shomestead right for life or for so long as survivorelects to use homestead– May not be defeated byeither spouse in will20

Surviving Spouse Homestead Sometimes referred to as a “stealth life estate”– Legal life estate created by operation of law– Right vests immediately upon death– The right can last for thelife of the surviving spouse21

Surviving Spouse Homestead Surviving spouse OR guardian of a minor childcan continue to occupy Permanent abandonment will terminate thehomestead right22

Surviving Minor Children--Homestead Surviving Minor entitled to constitutionalsurvivor’s homestead Parents cannot defeat homestead rights ofminor children through testamentary devise– However, parents canconvey homesteadwhile alive.23

Surviving Minor Children Homestead Surviving adult children are not among theclass of persons who may claim homestead Fee ownership passes under terms of will buthomestead remains superior right24

Marriage and Divorce One Homestead Per Family Single Man and Single Woman– Each have separate homestead– If get married, only have one homestead If married couple get divorced– Each have separate homestead25

HomesteadTYPES OF HOMESTEADS26

Two Types: Rural and Urban Homestead Established by the Texas Constitution:– Rural Homestead– Urban Homestead Question of fact whether Rural or Urban27

Rural Homestead Rural Homestead:– Limited to 200 acres– Not in city, town or village– Used for home28

Establishing the Rural Homestead Claimant must reside on part of the property Claimant must use remaining property forsupport of the family Use must bepermanent29

Urban Homestead Urban Homestead– Not more than 10 acres– In a city, town, or village– Used for a home30

Urban Homestead Property Code defines urban homestead:– Not more than 10 acres (contiguous); and– Located within a municipality or its extraterritorialjurisdiction or a platted subdivision; and– Served by Police and Fire protection and: At least 3 of the following:–––––ElectricNatural gasSewerStorm sewer; andwater31

Characteristics of Urban Homestead FamilyOne or more contiguouslots not exceeding 10 acresIn a city, town or villageUsed for purposes of urbanhome and place of businessIncludes improvementsMunicipal services Single AdultOne or more contiguouslots not exceeding 10 acresIn a city, town or villageUsed for purposes of urbanhome and place of businessIncludes improvementsMunicipal services32

Characteristics of Rural Homestead Family200 AcresNOT in a city, town or villageUsed for purposes of ahomeIncludes improvements Single Adult100 AcresNOT in a city, town or villageUsed for purposes of ahomeIncludes improvements33

HomesteadIn Re Hill, 972 F.2d 116 (5th Cir. 1992)34

Oil & Gas35

Homestead—Mineral Rights Constitutional & historical basis for mineralrights being included in homestead36

Homestead—Mineral RightsSouthern Oil Co. v. Colquitt,69 SW 169 (Tex. Civ. App. 1902)37

Oil & Gas Mineral Rights:– Homestead extends to un-severed minerals undersurface of land– Same result if homestead claimant executes oil andgas lease– Occupation and possession ofsurface impresses leasedmineral estate with homestead(homestead claimant owns areversionary interest)38

Oil & Gas Severed minerals:– No homestead in severed minerals if surfaceestate is not owned by mineral owner39

Oil & GasIn Re Poer, 76 B.R. 98 (N. D. TX 1987)40

Oil & Gas Open Mines Doctrine– General rule: Life tenant only entitled to interest on mineral royaltiesand bonuses– Exception: Life Tenant entitled to all royalties and bonuses fromhomestead property if production was in existencewhen the life estate came into existence41

Homestead—Mineral RightsRiley v. Riley,972 S.W.2d 149 (Tex. Civ.--Texarkana 1998)42

HomesteadHomestead RightsIn Separate Property of Other Spouse43

Homestead Rights In SeparateProperty Owned by Other Spouse Texas Constitution:– “An owner or claimant of the property claimed ashomestead may not sell or abandon thehomestead without the consent of each ownerand the spouse of each owner, given in suchmanner as may be prescribed by law.”44

Homestead Rights In SeparateProperty Owned by Other Spouse Family Code:– “Whether the homestead is the separate propertyof either spouse or community property, neitherspouse may sell, convey, or encumber thehomestead without the joinder of the otherspouse except as provided in this chapter or byother rules of law”45

Homestead Rights In SeparateProperty Owned by Other Spouse Property Code:– “If a homestead claimant is married, a homesteadcannot be abandoned without the consent of theclaimant’s spouse.”46

Homestead—Mineral RightsEvans v. Mills,67 F.2d 840 (5th Cir. 1934)47

Homestead—Mineral RightsGrissom v. Anderson,79 S.W. 2d 619 (Tex. 1935)48

Special Issues Involving Prior AttemptedConveyance of the Homestead49

Termination by Abandonment Discontinuance of use by overt acts– Examples: Acquiring new homestead Permanent or continuous rental of homestead toothers Sale of homestead Intent to permanentlyabandon the homestead50

Homestead No abandonment when:– Temporary absence – No Requirement to Remain on Homestead at All Times– Rental of property– No Abandonment if the Claimant Does Not AcquireAnother Homestead and the Claimant Intends toResume Possession After the Rental Term51

Reservation of Homestead Rights Homestead can be reserved Reservation preserves the homestead in thegrantor of the instrument Any subsequent conveyance(or lease) requires joinderof grantor (or ratificationor proof of abandonment)52

HomesteadPRACTICE POINTERS53

Texas Title Examination Standard14.90 HomesteadIf the property conveyed is or may be the homestead of married persons, whethercommunity property or separate property, an examiner must require the joinder of bothspouses, unless it is conclusively shown that the property is not, or is no longer,homestead.Comment:A tract’s homestead character, however, does not make a conveyance of the land (other thana mortgage or a deed of trust) by one spouse alone void. If the record title is in the name ofthe executing spouse, such a deed is merely inoperative while the property remains the non‐signing spouse’s homestead. Obviously, factors such as the passage of time should be takeninto consideration in assessing whether it is necessary that inquiry be made into whether atract of land conveyed by one spouse alone was homestead.Unlike a deed, a mortgage or deed of trust granting a lien on homestead property isabsolutely void unless joined by both spouses. This is because the Texas Constitutionprovides that no mortgage, trust deed, or other lien ‘‘shall ever be valid’’ except asauthorized thereby. Joinder by both spouses is only one of many strict requirements andlimitations the constitution places on the mortgaging of homestead.) Thus, the failure of oneof the spouses to join in a deed of trust or other mortgage is not cured even though theproperty ceases to be homestead.54

Homestead If mineral owner also owns the surface (evenif separate property), presume it is homesteadproperty and get both spouses to sign If mineral owner dies (even if separateproperty) and leaves surviving spouse openmines doctrine may apply55

Homestead Practice Pointers If property involved is potentially homestead,address in “Comment and Requirement” to TitleOpinion:– “You should determine whether the abovementionedspouse claimed the subject property as homesteadproperty on the date the lease was executed. If youdetermine that the property was claimed ashomestead property on said date, you should obtain aratification of the lease, effective as of the originaldate of the lease, executed with words of presentgrant by both spouses and file said ratification inKarnes County, Texas with a recorded copy furnishedto this office for review and comment.”56

Homestead Practice Pointers Waivers of homestead rights are void, illegaland unenforceable If doubt exists, get an affidavit of the ownersdesignating other property as homestead andstating that property being conveyed is nothomestead57

Texas Probate Law58

Probate Law Intestate– Community Property– Separate Property– Adopted Children– Anti-Lapse Statute59

Probate Law Wills– Holographic Wills– Attested Wills– Self-Proving Affidavit– Codicil60

Probate Law Revocation of Will No Revival Rule61

Basic Will Provisions Exordium ClauseIdentificationSpecific BequestsResiduary ClauseSurvival PeriodFiduciary AppointmentsFiduciary Powers and DutiesDisclaimers62

Trusts Living Trusts Testamentary Trusts– Spendthrift Protection– Rule Against Perpetuities Savings Clause– Powers of Appointment Life Estates63

Overview of Probate Process Formal Probate Executor versus Administrator Administration– Dependent Administration– Independent Administration64

Sale of Real Property &Mineral Transactions Personal representative’s authority to sell realproperty Independent executor’s and independentadministrator's authority to execute oil andgas leases Closing the estate65

Alternative Probate &Non-Probate Procedures Community administrationMuniment of titleSmall estate affidavitAffidavit of heirshipRecording foreign will in official public deedrecords66