If my spouse passes away, will I have to sell my home to meet creditor obligations?

By Investopedia Staff AAA
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

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