Kellie F. Stokes, Attorney at Law | Stokes Law Office, PLLC | www.kstokeslaw.comA married man is selling his home. He bought the property 5 years prior before he was married. He is the only person on title. He and his wife have lived in the property for 2 years. The escrow officer handling the transaction at the title company informs him that even though she is not on title, his wife must sign a few of the closing documents. At this point, he is very confused; she doesn’t own the property, so why must she sign?
This situation is not hypothetical; it is quite common in the real estate market today. It is important for real estate agents, loan officers, title companies, and others within to the housing market to educate buyers and sellers of their inherent rights: community, separate and homestead.
Community property is property that is acquired while you are married, unless that property is attained through inheritance or as a gift. Even if the property is only in the wife’s name, if she bought it while she was married, it is considered community property. The State of Texas is a community property state; any property acquired, especially with “community funds” i.e. funds that are earned by either husband or wife and are used jointly, is considered the right of both spouses.
Separate property is property acquired prior to marriage, or through inheritance or as a gift. It is considered separate from the community because it was acquired outside of the community, either before or through no direct relation to the community. The property is considered the right of the single person.
Homestead rights co-exist with either community or separate property. Homestead rights are earned by living in a property and considering it a place of residence. The best item to determine the intent of a homestead is the address listed on a driver’s license or identification card. A person can claim homestead of a property they do not own as long as they live in it and claim it as their place of residence.
For our example above, the property is considered the husband’s separate property, since he bought it prior to his marriage. However, the wife lives in the home, so she has homestead rights to the home. She must sign that she acknowledges the sale of the home and that she gives up her homestead rights. This is to prevent any issues in transferring title to the new owners.
When selling your home, let your real estate agent and title company know who owns the property on title, and if any additional adults claim the property as their homestead, such as a spouse or partner.
TRANSCRIPT | DEATH AND DIVORCE: COMMUNITY, SEPARATE, AND HOMESTEAD PROPERTY
Kellie F. Stokes | Stokes Law Office, PLLC| www.kstokeslaw.com
We have community property…we all familiar with that term? Separate property, and we have homestead. So what’s the difference between all of this? Because I’m certain at some point in your all’s career you probably have the title company say, “Oh because it’s homestead…” and it’s like, well what does that mean? Or you know, it’s community property and you get these lingos thrown at you. But why exactly is that the case? And so… Community property, basically by definition in Texas is the bias is that basically anything acquired during marriage is community property. And what that means is that the husband and wife both have a right to the property. Ok, that is the presumption.
Alright, then, separate property, then, by definition, is any property acquired before the person got married, or acquired after marriage by inheritance or gift. So, mom dies, leaves the house to daughter who’s married, that’s daughter’s house, okay? Cause she inherited it while she was married, however, she inherited it. Or, mom’s going into a nursing home, we hear that one, and she gifts the home to the daughter. Then again, that is daughter’s separate property, okay?
So, then we have homestead rights. Homestead rights are possessory, I can’t even say that word very well, can I? They mean possession. So, community property and separate property is how we title the name of the, uh, the style of a property. Homestead rights have to do with, “Do I have a right to live here”. And in Texas, out of any other state in the United States, we have what’s called the strongest homestead rights. We give people a right to stay in that house. And I tell you what, these banks are hating it, because they are foreclosing and they are seeing where it’s a pain because of these homestead rights when it comes to what our eviction rules are and all that. What they do love is that foreclosure is very easy in Texas, so we kind of, you know, weigh, er, even the scales out by doing, by making it that way.
Homestead rights, they arise by virtue of you living on a piece of property. They are independent of ownership status, okay? They are designed to protect family assets from forced sale and give a fresh start to a debtor. So what does all that mean? Basically a homestead right is, I own a property, okay, and my mom comes to live with me. My mom’s not on title, I own that property, but my mom lives there, okay. My mom has a homestead right. She has a right, and certain laws then get triggered of what her rights are in terms of that property and living on that property, okay. Why is that important? It is important because my mom calls that her homestead, that’s where she lives, alright? It’s her homestead. Well, my mom goes on a crazy spending spree, racks up a bunch a debt, her creditors can’t come and attach to her homestead, okay. So they can’t come and put a lien on my property because it’s my mom’s homestead. Does that make sense?
Now, let’s say that I own a piece of rental property, and I leased it, uh, to Luis. So Luis is my tenant and he’s renting this house from me, okay, and I go and get in a lot of trouble, and debtors want to come after me. They can put a lien on that property that I own as a real, as a rental property, okay? Because I’m not living in there. Does that make sense? However, Luis goes and racks up a bunch of debt, and that sort of thing, they can’t come put a lien on my property, one, because Luis doesn’t own it, but two, because it is Luis’s homestead okay? So when this comes up is when you have, and people just, I can’t understand this, is that where someone has signed a deed over, but they still live in the house. So we get title, you know, it’s like an extended family living together, and when they bought the house three of them went on title, and over time they deeded their property, they deeded everything over to this one individual, but yet they all still live there, okay? And the title company comes in and says, “Well who lives there? We need all three to still sign because they still have what we call homestead rights.” They have a right to live there.
Um, where it’s most common is a husband and wife are getting a divorce. And they both live in the property. And the husband’s, the thought is, the husband’s going to move out and go find his own place. Well, they uh, then they decide, well, you know what let’s just sell it. And so they are trying to sell the property and part of their agreement before they’ve signed anything the wife’s going to get all the proceeds from the sale. And so the husband says, “Well I’ll just deed over the property to you since you’re gonna, then you can just handle the closing. I don’t want to have anything to do with this.” And, but the husband’s still living in that property, okay?