A:

There are laws that can protect, to a certain extent, the value of a home from property taxes and creditors following the homeowner's death. A homestead exemption is a legal doctrine preventing the forced sale of a home and protecting the home's value from property taxes and creditors. The homestead exemptions can be found in state statutes and constitutional provisions across the U.S., and are an automatic benefit in some states. In states where the homestead protection is not automatic, homeowners must file a claim which must be re-filed when moving primary residences.

The primary features of homestead exemptions are typically meant to provide shelter for the surviving spouse, while preventing the forced sale of a home to meet creditor obligations and property taxes. Most homestead exemptions use a monetary value to determine property tax protection, implementing a progressive style tax to home value to assure that homes with lower assessed value benefit the most from the exemption. For example, a homestead exemption could protect only the first $100,000 of a home's assessed value, so a home valued at $350,000 would be taxable on $250,000 of that amount.

Although homestead exemptions are in place to protect the surviving spouse from forced sale, if the credit obligations and property taxes greatly exceed the exemption amount the home may still be forced to go to sale to meet those obligations. (To learn more, see Top 7 Estate Planning Mistakes.)

This question was answered by Lovey Grewal

RELATED FAQS

  1. What is a family Limited Liability Company (LLC)?

    Learn about family limited liability (LLC) companies and why they are useful tools in the United States to protect family ...
  2. How is maintenance of standard of living for survivors accomplished in estate planning?

    Understand what elements of an estate plan can assist in creating certainty for survivors that allows them to maintain their ...
  3. What is the difference between an intervivos trust and a testamentary trust?

    Understand the differences between a testamentary trust and an inter-vivos (living) trust, and learn why each is important ...
  4. What are the differences between a Chartered Financial Analyst (CFA) and a Certified ...

    Understand the differences between a Chartered Financial Analyst and a Certified Financial Planner. Learn how each approaches ...
RELATED TERMS
  1. See-Through Trust

    A trust that is treated as the beneficiary of an individual retirement ...
  2. Settlor

    The entity that establishes a trust. The settlor also goes by ...
  3. Personal Property Securities Register (PPSR)

    A written, public, online record of legal claims to personal ...
  4. Roll Rate

    The percentage of credit card users who become increasingly delinquent ...
  5. Personal Representative

    The executor or administrator for the estate of a deceased person. ...
  6. Mini-Miranda Rights

    A statement a debt collector must use when contacting an individual ...

You May Also Like

Related Articles
  1. Entrepreneurship

    MLPs: How They Are Taxed

  2. Investing Basics

    Passing Boomers Will Leave A Big Economic ...

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!