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.

Thankfully, 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 stability. Debtor’s prisons were abolished in the 1800s, and in today’s legal world, you cannot be jailed today simply for unpaid debt. Yet debt remains a constant concern. About 90% of Americans carry some form of debt, and total household debt continues to climb, surpassing $18 trillion in 2025.

Although debtor’s prisons are gone, the risk of losing a home to creditors remains real. Homestead exemptions—originally designed to keep roofs over families’ heads—still provide critical protection. Yet these laws vary widely among states, shaped by distinct historical, political, and economic priorities.

1. The “debtor-friendly” states. Florida and Texas offer broad homestead protections, shielding primary residences from most creditor claims. These generous exemptions, despite acreage or residency limits, remain among the nation’s most protective. Protecting homes encouraged settlement and risk-taking by ensuring families kept shelter despite business failures.

2. The “creditor-friendly” states. Others states cap exemptions at specific dollar amounts to balance debtor protection with creditors’ rights. This reflects a philosophy emphasizing fairness while preserving some family security. In most states, individuals can claim homestead protection in bankruptcy regardless of marital or family status.

Regardless of generosity, all homestead laws uphold one principle: every home deserves 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; 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. As mentioned above, these caps to dollar amounts or percentages do not apply to Texas residents, who have protection for their entire homestead.

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 (like Texas) 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:

• 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.

1. 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 is typically sufficient 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.

2. 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 involved. Transferring ownership to an irrevocable trust is more permanent than transferring it to a revocable trust. Unless the trust reserves rights, like allowing the grantor to live in the home, the homestead exemption may be lost. Because an irrevocable trust prevents the grantor from reclaiming ownership, most states find the grantor lacks a present ownership interest. As a result, the homestead exemption is often jeopardized once property is placed in an irrevocable trust.

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.

3. 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.

4. Adding a Co-Owner or Joint Owner

Through the use of careful and well crafted legal tools, adding a family member or another person as a joint owner can mean that your home passes to the other owners upon your death, and has the opportunity to skip probate. However, this action may affect your homestead exemption. Some states prorate the exemption based on each owner’s property share. If one joint owner already claims a homestead exemption elsewhere, the shared property’s exemption may be reduced accordingly. In other states, if one joint owner qualifies, they may claim the full homestead exemption for the entire property. 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.

Were Here to help

Homestead exemptions offer clear, tangible benefits: lowering property taxes and protecting a primary residence from certain creditors. They’re a foundational piece of an 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. Nielsen Law PLLC Provides family-focused estate and business planning to individuals and families in Austin, Round Rock, Cedar Park, and the Central Texas area. For more information, and to learn about our firm, please contact us to learn how.