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Foreclosure on a Homestead if the Person is Deceased

In Texas, there has been a long history and emphasis placed upon protecting debtors from losing their home. State law affords debtors a special protection if their home qualifies as a homestead. A homestead designation protects a forced sale of a home to pay debts and judgments.

To qualify as a homestead, a person must actually occupy the residence, or if they do not then there must be an intent to occupy coupled with some overt act of preparation. Gilmore v. Dennison, 115 S.W.2d 902 (Tex. 1938). One can also file an affidavit of formal designation with the county records department in the county where the property is located in order to give notice to the world that the homestead designation has been placed on the listed property. The key component is that the property is being used for a residential or business purpose. There are two types of homesteads: (1) urban homestead – consisting of 10 acres or less – and (2) rural homestead, which is defined as an area not within the utilities or public services of a town or municipality – consisting of 200 acres or less for a family or 100 acres or less for an individual. If the homestead designation is made by a married couple then each spouse must give consent in order for the property to be sold, conveyed or encumbered. Finally, a homestead designation will terminate upon divorce, abandonment of the homestead, or death.

However, death by itself does not mean the homestead designation has terminated. Texas Estate Code §102.003 allows for the passage of the homestead designation. It states, “the homestead of a decedent who dies leaving a surviving spouse descends and vests on the decedent’s death in the same manner as other real property of the decedent and is governed by the same laws of descent and distribution.” This means that a surviving spouse or minor child who was living in the home can receive the property under the same homestead designation.

Additionally, the next section, §102.004, provides that if §102.003 is applicable then the homestead is not liable for the payment of any of the debts of the estate, other than the following exceptions:

  1. Purchase money for the homestead,
  2. Taxes due on the homestead,
  3. Work and material used in constructing improvements,
  4. Owelty of partition,
  5. Refinancing of a lien against the homestead,
  6. An extension of credit, or
  7. A reverse mortgage.

Thus, a piece of property can become subject to a foreclosure sale despite the homestead designation when it qualifies as one of the above named exceptions. A surviving spouse or a minor child who inherits a designated homestead or inherited homestead must ensure that they stay current and continue to make payments on the mortgage, taxes, and other payments as required. If they fail in this regard, the homestead designation set up by the decedent will not protect the surviving spouse or minor child from a forced sale or payment of debts.