Five Ways Smart Homeowners and Investors Protect their Texas Real Estate

If you do business in the Lone Star State, then you’ve probably heard the phrase “Gone to Texas.” It’s a 200-year-old joke about the state’s homestead protection laws. The homestead–or legal residence–is an old American tradition, a symbol of family self-sufficiency.

Texas’ homestead laws help protect families’ valuable assets from debt-collectors. Over the years, other asset protection resources have become available to help protect your home.

Smart investors also make use of LLC holding companies, living trusts, and the efficiency and reliability of online legal document services.

Read on to learn exactly how smart homeowners and investors are protecting their Texas holdings, and how you can get started doing the same.

1.   File Your Homestead Legal Forms

The foundation of any Texas asset-protection plan begins with your homestead. Simply living on a piece of Texas real estate that you own, and using it as your primary residence qualifies it as a homestead. This is where the story “Gone To Texas” picks up again. As the story goes, back in the early 1800’s people started moving to Texas to escape the debt they had incurred in the financial crisis of 1819 and the best place to start over was in Texas.

Not only is your primary residence protected against most creditors, but so are many of your personal belongings, things like your furnishings, jewerly, and paid for cars. I should also mention you get to keep two guns, two horses, a saddle and blanket for each.

So if you own a house in Texas, and it’s your primary residence be sure to file your homestead exemption. You can find more information about the Texas homestead exemption under  Article 16, Section 50 in the “mighty” Texas Constitution.

Filing for official designation, however, will qualify you for property tax exemptions under Article 8, Section 1-a and 1-b. You can also download this Application for Residential Homestead and submit it to your local county clerk.

2.   Create a Living Trust

Your residence only ceases to be a homestead if it is abandoned, or if you die. This is why you should create a living trust, and add your homestead and related assets to that trust. If your homestead is housed in a living trust, Texas Property Code Section 41.0021 allows it to keep its homestead status and exemptions upon your death, and during transfer to heirs.

A living trust is also executed by your designated successor trustee, completely outside of the court probate system. This adds a layer of anonymity, making it more difficult for creditors to pursue your family after your death.

3.   Start a Limited Liability Company (or Two)

The homestead protections we discussed so far only apply to your personal property–not your commercial properties or business assets. These assets should be held in a limited liability company (LLC) to create a layer of protection between them and your personal creditors.

If you have multiple properties, consider organizing as a series LLC. This allows you to compartmentalize each asset’s liabilities within a subsidiary, or series, in your LLC. This limits the any suit or default against an asset to its series in the company, and leaves your other investments outside that series protected.

4.   Create And Store Your Documents Online

Make the asset-protection process easier for yourself by using the internet and web-based services to create and store documents. You can find all the state’s basic business forms on the state department’s website, and all homestead-related forms on the comptroller’s website.

Once you’ve received official copies and certificates from the state, use the internet to store them securely on a cloud server. Google, Apple, Amazon, and Microsoft all provide free cloud storage accounts. These allow you to upload your documents to web-based servers.

This means that if something happens to your computer or documents at home, you can always access digitally saved copies in your cloud account.

5.   Designate A Power of Attorney

A successor trustee will be able to manage your assets held inside a living will if you become incompetent or incapacitated. For all other assets, you should consider delegating durable power of attorney to someone you trust.

Unlike a general power of attorney, a durable power of attorney is intended to adjust if you  become unable to take care of your own affairs. Like a general power of attorney, your agent can be granted as many, or as few powers, as you wish.

Ideally, your agent will ensure your business and personal affairs are managed according to your wishes if you cannot manage them yourself.

Conclusion

The homestead is the starting point of a Texas asset-protection strategy, but smart homeowners and investors don’t stop there. Protect your personal assets by housing them in a living trust, and safeguard your business assets inside series LLCs. Use online legal documents and cloud storage for easier filing and secure recordkeeping. Finally, delegate powers of attorney to a trustworthy agent in case you are incapacitated.

Follow all these steps, and you’ll have the peace of mind that you are protecting your investments with the full force of Texas law.