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 property / belongings can I keep after filing bankruptcy?

    Discover which types of property you can keep after filing bankruptcy by listing them as exempt from normal liquidation proceedings. Read Answer >>
  2. Is it true that you can sell your home and not pay capital gains tax?

    It is true in most cases. When you sell your home, the capital gains on the sale are exempt from capital gains tax. Based ... Read Answer >>
Related Articles
  1. Taxes

    Are You Missing Out On These Tax Exemptions?

    To lower your tax bill, make sure that you're taking all the exemptions that apply to you.
  2. Managing Wealth

    Economics of Owning a Vacation Home

    Discover the financial factors behind owning a second home and how weighing your options can determine if a vacation home is right for you.
  3. Investing

    Equity Stripping Leaves Creditors Empty-Handed

    Add additional debt to your real estate assets to keep the creditors at bay.
  4. Personal Finance

    Buying a Home: Cash Vs. Mortgage

    If you have the funds, should you buy your home with all cash? Here's how to decide which option – cash or mortgage – makes the most sense for you.
  5. Investing

    Your Property Tax Assessment: What Does It Mean?

    The amount of a property tax bill is based on the property’s value, the exemptions it qualifies for, its use and the local property tax rate.
  6. Taxes

    Your Property Tax Assessment: What Does It Mean?

    Understanding your property taxes can protect you from financial shocks.
  7. Taxes

    The 7 Best States For Property Taxes, and Why

    Understand why some states have high property taxes while others have low property taxes. Learn about the states with the lowest property taxes.
  8. Taxes

    8 States With Estate Taxes

    Understand the difference between the federal estate tax and state-specific estate taxes. Learn about some of the worst states with estate taxes.
  9. Investing

    Will You Break Even On Your Home?

    Calculate how much your property will need to appreciate to cover the costs of owning it.
  10. Taxes

    Tax Breaks for Second-Home Owners

    Owning a second home is a great investment for a variety of reasons, but you need to know the tax implications of multi-home ownership.
RELATED TERMS
  1. Homestead Exemption

    Laws designed to protect the value of a home from property taxes ...
  2. Waiver Of Exemption

    A provision in a consumer credit contract or loan agreement that ...
  3. Exempt Income

    Certain types or amounts of income not subject to federal income ...
  4. Asset Protection

    The concept of and strategies for guarding one's wealth. Asset ...
  5. Mill Rate

    The amount of tax payable per dollar of the assessed value of ...
  6. Exemption

    A deduction allowed by law to reduce the amount of income that ...
Hot Definitions
  1. Federal Direct Loan Program

    A program that provides low-interest loans to postsecondary students and their parents. The William D. Ford Federal Direct ...
  2. Cash Flow

    The net amount of cash and cash-equivalents moving into and out of a business. Positive cash flow indicates that a company's ...
  3. PLUS Loan

    A low-cost student loan offered to parents of students currently enrolled in post-secondary education. With a PLUS Loan, ...
  4. Graduate Record Examination - GRE

    A standardized exam used to measure one's aptitude for abstract thinking in the areas of analytical writing, mathematics ...
  5. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  6. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
Trading Center