What Is A Homestead?
A homestead is a residence with its contiguous land and buildings occupied by the owner providing shelter for the habitant(s).
Asides from this, it’s a valuable investment option with potentially huge returns for sale or securing credit facilities.
To protect bereaved families where the departed members incurred huge debts before death, English law had ensured that they ascribed an out-of-bounds status to homesteads which bars aggrieved creditors from forcing a sale to clear the debts.
The practice was adopted by the United States where it’s referred to as ‘homestead laws’.
Homestead laws differ per state with each one having slightly altered positions on the permissible prerequisites for a property to be referred to as a homestead.
Condominiums, co-ops, and mobile homes are not exactly the traditional or typical home settings but they still qualify as homesteads.
In certain states, there are restrictions on the amount of land (e.g. half an acre) that falls under the homestead laws.
Non-ownership of land under or around the properties does not automatically discount homes as not being covered by homestead laws.
A key factor is the primary residence of the homeowner in the property.
Thus, it’s impossible to lay claims to homestead protection for owned or rental property in separate locations except a new residence is re-filed for exemption.
- This protection is referred to as ‘homestead exemption’, a legal provision that functions as a shield to the home from creditors in the event of the:
- death of a homeowner’s spouse
- declaration of bankruptcy
It also provides tax relief for surviving spouses, with low-value houses benefiting the most.
The homestead exemption, however, cannot prevent a bank foreclosure (acquisition of a home due to failure to make timely mortgage payments).
Protection coverage and laws differ per state for homesteads. For instance, in Texas, rights to possession validate homestead rights.
Florida State expects individuals to file a sworn statement stating their intentions to maintain the property as their permanent home before homestead privileges are conferred.
Residents of California are allowed to tender an automatic homestead exemption to declare the habitation as a homestead.
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