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Requirements for Exemption

Homestead is the home or house where a family resides.  A homestead may contain one or more lots or tracts of land with the buildings and other appurtenances[i].  However, a person cannot have two homesteads at the same time, and a removal from one that gains a new homestead is considered as abandonment of the old.

It is to be noted that once property is impressed with a homestead character, it continues to be the homestead until the owner voluntarily changes its character, by disposing of it or by abandoning it as a homestead[ii].  The object of the homestead laws is to protect the holder in the right to preserve the home; both from his/her own improvidence and also from the rapacity of creditors, and such statutes are to be liberally construed[iii].

The statutory scheme governing homestead exemptions creates a protected interest in the property, a homestead, subject to the terms and limitations of that scheme.  It is to be noted that the homestead exemption law creates an exemption that precludes the seizure or forced sale of property under legal process.

The homestead exemption is intended to preserve the home where a family may be sheltered and live beyond the reach of economic misfortune[iv].  By its own terms, the homestead exemption applies to the involuntary taking of real property for any purpose.  Moreover, the estate cannot be divested even by the commission of criminal acts[v].

It is to be noted that under some statutes, homestead of every person is exempt from judicial sale regardless of their status generally[vi].  Therefore, a person who is married or unmarried, single, head of the family comes under this exemption.  For the purpose of a homestead exemption, the family relationship must be of a domestic and permanent character.  In states where domestic partnerships are recognized, registered domestic partners living together is held to constitute the equivalent of a family.  Although family is not a requirement for claiming a homestead, it may be a basis for claiming a higher homestead exemption.  In order to constitute a family, there is no requirement that the head of the family must be married.  The family relationship can be between siblings, adult children and their parents, or grandparents and grandchildren.

It was observed that a homestead exemption is not limited to husband and wife, but extends to groups bound together by ties of consanguinity living together as a household[vii].  However, if both a husband and wife hold property in separate interests; the homestead exemption floats between the two interests and is only used when the property is sold[viii].

When the head of the family dies, then the surviving spouse maintains the same homestead rights as both spouses had before the death of the other.  Additionally, a premarital agreement can include a provision waiving those rights.  If a claimant’s spouse waives such future rights, it must not affect a claimant’s ability to claim a present family homestead[ix].  It is to be noted that a homeowner can claim only one homestead at a time.  If spouses are divorced or separated, then both of them can establish a separate homestead.

Some statutes extend the right to a husband or wife to continue to possess and occupy a homestead acquired during the life even after the death of the other.  This right is also extended to the children, after the death of both parents[x].  Generally, an adult child will not come within the meaning of the family under the homestead law.  However, it was observed under some statutes that dependent adult children can be constituent members of a family for homestead purposes if they do not have any home elsewhere[xi].

In order to claim a homestead exemption, it must be shown that the disputed premise is occupied by the debtor and provided to him/her for homestead purpose.  The occupancy must be proved as a permanent one and not a part time lodging place.  An individual who seeks homestead protection has the initial burden to establish the homestead character of his/her property[xii].

The claimant must show a combination of both overt acts of homestead usage and the intention on the part of the owner to claim the land as homestead.  Possession and use of land by one who owns it and who resides upon it makes it the homestead in law and in fact.  It is to be noted that mere occupancy will not make a property a homestead.  However, mere evidence of overt acts of homestead usage is sufficient to establish a homestead.  This is because actual homestead use carries a presumption of homestead intention[xiii].

However, a homestead will not be protected from forced sale if the underlying debt was for purchase money of the property claimed as a homestead, to pay taxes or for improvements to the homestead[xiv].

In the case of a homestead exemption claim, misrepresentations by a homestead claimant can create an equitable estoppel to the claim. There are three separate situations in which estoppel apply.  They are[xv]:

  • The claimant owns only one piece of property, and said property is used as the claimant’s homestead at the time of the mortgage;
  • The claimant owns more than one piece of property at the time of the mortgage, but only one parcel can be the homestead as a matter of law;
  • The claimant owns more than one piece of property which is used and occupied as a homestead prior to the time one of them is mortgaged.

It is to be noted that the homestead is granted not only for residence purposes, but also for all purposes of general utility[xvi].  Similarly, homestead exemption also extends to a place where the head of the family or members conduct such business or avocation that is necessary for the support and comfort of the family.

A family or single adult can claim either a rural or urban homestead.  An urban homestead can be comprised of a residential and/or business homestead.  Whereas, a rural homestead exemption does not include a business homestead component.  Court considers many factors to determine whether a homestead is rural or urban such as[xvii]:

  • The location of the land with respect to the limits of the municipality;
  • The situs of the lot in question;
  • The existence of municipal utilities and services;
  • The use of the lot and adjacent property.

It was observed that courts must liberally construe the homestead exemption statutes in the debtor’s favor.  However, an owner can change the limits of his/her homestead only if such a change will not prejudice conveyances or liens previously made or created[xviii].

[i] Osloond v. Farrier, 2003 SD 28 (S.D. 2003).

[ii] In re Estate of Wallace, 1982 OK 80 (Okla. 1982).

[iii] Keyes v. Cyrus, 100 Cal. 322 (Cal. 1893).

[iv] In re Klaiber, 265 B.R. 290 (Bankr. M.D. Fla. 2001).

[v] People v. One Residence Located at 1403 E. Parham St., 251 Ill. App. 3d 198 (Ill. App. Ct. 5th Dist. 1993).

[vi] Welsh v. Citizens Nat’l Bank, 420 N.W.2d 473 (Iowa 1988).

[vii] In re Estate of Fink, 4 Kan. App. 2d 523 (Kan. Ct. App. 1980).

[viii] In re McFall, 112 B.R. 336 (B.A.P. 9th Cir. Cal. 1990).

[ix] Painewebber Inc. v. Murray, 260 B.R. 815 (E.D. Tex. 2001).

[x] Union Trust Co. v. Cox, 55 Okla. 68 (Okla. 1916).

[xi] In re Hill, 972 F.2d 116 (5th Cir. Tex. 1992).

[xii] Lifemark Corp. v. Merritt, 655 S.W.2d 310 (Tex. App. Houston 14th Dist. 1983).

[xiii] In re Villarreal, 401 B.R. 823 (Bankr. S.D. Tex. 2009).

[xiv] In re Kennard, 970 F.2d 1455 (5th Cir. Tex. 1992).

[xv] In re Villarreal, 401 B.R. 823 (Bankr. S.D. Tex. 2009).

[xvi] Green v. Richardson, 122 La. 361 (La. 1908).

[xvii] Painewebber Inc. v. Murray, 260 B.R. 815 (E.D. Tex. 2001).

[xviii] Chariton Feed & Grain, Inc. v. Kinser, 794 F.2d 1329 (8th Cir. Iowa 1986).

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