Homestead Exemptions and Estate Planning
The term homestead may seem like a throwback to pioneer days, but homestead exemption laws are directly relevant to today’s estate planning and can play a valuable role in a modern plan.
Almost every state has some form of homestead exemption law primarily focused on reducing property taxes and protecting home equity from creditors. While the best-known homestead law is rooted in the nineteenth century’s westward expansion, the underlying principle—a secure home for families—has evolved into a variety of state-level property protections.
You do not need a covered wagon, a plow, or a team of oxen to benefit from a homestead exemption. However, you do need an estate plan that reflects your state’s specific laws and locks in its primary residence protections.
The Spirit of the Law: A History of Protection
The spirit of the homestead law has always been about more than acquiring property; it is about securing a refuge.
While many people associate “homestead” with Abraham Lincoln’s 1862 Homestead Act, which encouraged westward expansion by giving land to settlers, modern homestead exemptions evolved differently.
These protections were born at the state level based on nineteenth-century social policy aimed at ensuring that a family’s home could not be seized to satisfy a debt at a time when debtor’s prisons were common and a single financial hardship could lead to a family’s total ruin.
In the nineteenth century, laws governing property and debt fell largely in the domain of individual states, not the federal government. This is why each state has its own unique homestead law today. The core goal of homestead laws, though, despite state-level differences, was and remains simple: to provide a stable foundation for people and prevent financial ruin and homelessness due to debt.
Why Differences Evolved: Historical Examples
Lawmakers then and now recognized that a home is not only a valuable asset but also a cornerstone of prosperity and financial security.
Debtor’s prisons were abolished in the 1800s, and you cannot be arrested or go to jail today simply for having an unpaid debt. However, debt remains an ever-present concern for many people. An estimated 90 percent of Americans have some form of debt, and total household debt and delinquency rates are on the rise [1]. Household debt reached more than $18 trillion in the second quarter of 2025 [2].
Reducing debt is Americans’ top financial priority for 2025 [3]. A mortgage is the largest household debt category by a large margin [4]. The median amount owed exceeds $260,000, with an average monthly payment of $2,200 [5].
Although formal debtor’s prisons are a thing of the past, the modern risk of losing your home to creditors remains very real. Homestead exemptions that evolved in part to keep a roof over peoples’ heads through tough times can offer a financial lifeline, but despite their shared spirit and history, today these laws vary widely from state to state, reflecting unique historical, political, and economic priorities.
The “debtor-friendly’ states. States such as Florida [6] and Texas [7] are known for their exceptionally broad homestead protections, often shielding a primary residence, regardless of its value, from most creditor claims. While some states’ liberal exemptions include acreage and residency limits, they remain among the most protective in the nation. Protecting a primary residence incentivized settlement and risk-taking by ensuring that families could not lose their shelter due to business failure.
The “creditor-friendly” states. Other states cap the homestead exemption at a specific dollar amount, aiming to balance protection for debtor-homeowners with creditors’ rights. This approach reflects a more measured legal philosophy that prioritizes fairness in debt collection while still offering some family security. Notably, in most states, individuals can still claim homestead protection in bankruptcy regardless of their marital or familial status. However, the amount of protection available varies widely from state to state, and certain limitations may apply if the property was recently acquired or transferred.
Regardless of the generosity level, every state homestead law preserves the same core principle: a person’s home should offer a measure of protection in an unpredictable world.
What Is a Homestead Exemption?
Now that you understand the “why” of homestead exemptions—the spirit of the laws and the historical development behind them—the question is “what, exactly, does the exemption do?”
Homestead exemptions serve two main purposes: reducing property taxes and protecting home equity from certain creditors.
A state’s exemption
applies only to a homeowner’s primary residence;
can reduce the taxable value of a home, lowering property tax obligations [8]; and
protects a portion of home equity from unsecured creditors, such as credit card or medical debts, although it does not prevent foreclosure by a mortgage holder.
Some states calculate exemptions as a fixed dollar amount, while others use a percentage of the home’s value. The latter approach typically benefits higher-valued homes more significantly.
What Are the Requirements for a Homestead Exemption?
Homestead exemption requirements differ by state, but generally include the following:
Ownership: You must legally own the property
Primary residence: The property must be your main home
Residency duration: Some states require minimum residency periods
Application: Some states grant the exemption automatically; others require filing with the local assessor
Special circumstances: Seniors, veterans, disabled persons, or first responders may qualify for additional exemptions
While there are commonalities among states, there is also great state-by-state diversity in homestead protection:
Some states allow you to protect the full value of your home from creditors while others offer only limited, or virtually no, protection.
The method for claiming the homestead exemption also varies: some states apply the exemption automatically, while others require homeowners to file a formal declaration of homestead.
US territories have their own unique homestead rules. For example, American Samoa protects only people of Samoan descent, and Puerto Rico requires a formally declared and notary-certified filing.
Some states, including Arizona, Massachusetts, Washington, and Ohio, have recently changed their homestead laws to offer greater protection against creditors.
This area of law bears close monitoring, as many states continue to expand homestead protections and adjust exemption amounts to reflect today’s housing and economic realities.
Estate Planning Strategies That Can Jeopardize the Homestead Exemption
While homestead exemptions are a valuable, time-honored estate planning tool, they have limitations and should be balanced against other planning strategies in your plan for maximum effectiveness.
Revocable Trusts
Placing a home into a revocable living trust is a popular strategy to avoid probate. However, since you are technically transferring the home’s title from yourself as an individual to the trust as a separate legal entity, the transfer may void the homestead exemption in some states. The exemption is often tied to an individual’s personal ownership of their primary residence, which you no longer have under a trust.
To account for this legal technicality, in many states a well-drafted trust can explicitly state that the original owner retains the right to live on the property, control it, and remove the property from the trust. This so-called present possessory interest may be enough to satisfy the requirements for a homestead exemption in a particular state. Texas law, for example, has specific provisions allowing the homestead exemption to continue for a home held in a qualifying trust [9].
Irrevocable Trusts
As discussed above, most states allow homestead protection to continue after a primary residence has been transferred to a revocable trust. The reasoning is that the individual who creates the trust (i.e., the grantor) usually retains the ability to amend, revoke, or terminate the trust, therefore retaining an ownership-like interest in the property and, with it, the right to claim the homestead exemption.
The law is less flexible when an irrevocable trust is used. Transferring ownership to an irrevocable trust is a more-permanent move than a transfer to a revocable trust. Unless the trust specifically reserves certain rights, such as the grantor’s ability to occupy or use the property, it will likely result in loss of the homestead exemption. Essentially, since the very nature of an irrevocable trust is that the grantor cannot take the property back or change the trust’s terms, most states conclude that the grantor no longer has a present possessory interest as an owner, and the homestead exemption is therefore jeopardized.
While there are some exceptions (e.g., in Texas and Florida, a carefully drafted irrevocable trust may let the owner or a beneficiary continue to occupy the property as a primary residence and preserve the homestead exemption), an irrevocable trust is typically chosen for other benefits, such as better tax advantages and stronger asset protection, in a trade-off for the homestead exemption.
Life Estates
A life estate deed transfers ownership of your real property to a beneficiary upon your death but allows you to retain the right to live in and use the property for the rest of your life. In most states, you also retain your homestead exemption for as long as you live.
The potential hazard of a life estate deed is that you are giving up a significant degree of control and flexibility in exchange for probate avoidance and homestead protection. Once the deed has been signed, you lose the ability to sell, mortgage, or take out a reverse mortgage on the property without the beneficiary’s consent (remainderman).
Adding a Co-Owner or Joint Owner
Adding a family member or another individual as a joint owner to your home is a simple way to ensure that it automatically passes to them upon your death (as long as the form of joint ownership includes survivorship rights). Keep in mind that this action may affect your homestead exemption because, in some states, the exemption amount is prorated based on each owner’s share if the property is not the homestead of all the owners or if one joint owner is already claiming a homestead exemption on a separate property. In other states, as long as one joint owner qualifies for the homestead exemption, they are allowed to use the full exemption for the entire property [10].
To illustrate: if your state has a $100,000 homestead exemption and you add your child as a 50 percent co-owner, your protection might be halved to $50,000.
In this scenario, you must weigh the benefits of avoiding probate against the potential loss of asset protection and property tax savings.
How to Apply for a Homestead Exemption
In states where filing for an exemption is required, homeowners must generally do all of the following:
Visit the local or county tax assessor’s office or website
Complete the homestead exemption application
Provide proof of ownership, residency, and other qualifying status (age, veteran, disability, etc.)
Submit before the state’s filing deadline to ensure full protection
Even when an exemption automatically applies, we recommend verifying eligibility and confirming that the local assessor has correctly applied the exemption.
Bringing It All Home: Balancing Your Strategies
Homestead exemptions offer clear, tangible benefits: lowering property taxes and protecting a primary residence from certain creditors. They are a foundational piece of a solid estate plan, but like all pieces, they must be thoughtfully integrated as one part of the planning puzzle.
Estate planning is not a “one or the other” or “zero sum” exercise. Placing a home in a trust might risk the homestead exemption, but it could provide a greater benefit in asset protection or tax planning. This choice might be based on tax rates, debt obligations, and other individual factors.
Understanding state-specific rules and strategic tradeoffs and working with a local estate planning attorney to achieve the right balance of protections in your plan can help to keep your home the secure refuge it is intended to be, in line with the centuries-old spirit of homestead laws. If you would like to discuss your unique situation and how we can protect you, your family, and your home, give us a call.
[1] Maureen Milliken, The Demographics of Household Debt in America, Debt.org (July 11, 2025), https://www.debt.org/faqs/americans-in-debt/demographics/.
[2] Household Debt and Credit Report, Fed. Res. Bank of N.Y., https://www.newyorkfed.org/microeconomics/hhdc.
[3] Reducing Debt Is Americans’ No. 1 Financial Priority for 2025, CFP Board Research Finds, CFP Bd. (Dec. 4, 2024), https://www.cfp.net/news/2024/12/reducing-debt-is-americans-no-1-financial-priority-for-2025-cfp-board-research-finds.
[4] Maureen Milliken, The Demographics of Household Debt in America, Debt.org (July 11, 2025), https://www.debt.org/faqs/americans-in-debt/demographics/.
[5] Id.
[6] Fla. Const. art. X, § 4.
[7] Tex. Prop. Code § 41.001.
[8] Benefits of Homestead Exemption: A Guide for REALTORS, Nat’l Ass’n of Realtors, https://www.nar.realtor/property-taxes/homestead-exemption.
[9] Tex. Prop. Code § 41.0021.
