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

RELATED FAQS

  1. What's the difference between regressive and progressive taxes?

    Learn what a regressive tax is in comparison to a progressive tax, and understand the specific types of taxes that are considered ...
  2. What is the difference between compounding interest and simple interest?

    Learn about simple interest and compound interest, how to calculate the two types of interest and the main difference between ...
  3. How do I get a higher limit on my credit cards?

    Understand how credit limits work with major credit card companies and things you can do to get a higher limit on your credit ...
  4. What does U.S. law say about contingent beneficiaries?

    Learn about regulations the United States has on the naming of contingent beneficiaries, the types of contingencies that ...
RELATED TERMS
  1. Straight-Roller

    A credit card account which is increasingly delinquent, and in ...
  2. Keep And Pay

    A bankruptcy allowance that lets an individual keep an asset ...
  3. Deadbeat

    A slang term for a credit card user who pays off his or her balance ...
  4. Contingent Beneficiary

    1. A beneficiary specified by an insurance contract holder who ...
  5. Skip Tracer

    A professional who tracks down individuals who don’t want to ...
  6. 341 Meeting

    The meeting of creditors that occurs when an individual files ...

You May Also Like

Related Articles
  1. No results found.
Trading Center