Homestead exemption

What it means

Homestead protection appears in three different roles depending on the state: a shield against creditors during life, a right for a surviving spouse or children after a death, and in some states a property tax reduction.

As an estate concept, it usually means the home passes to, or is preserved for, the surviving spouse and minor children ahead of general creditors.

The scope varies enormously — some states protect an unlimited value of homestead, others a modest fixed amount.

Why it matters

It can be the difference between a surviving spouse keeping the house and the house being sold to pay the estate's debts.

It also affects whether the home is available for distribution at all, which changes what the rest of the estate is worth to everyone else.

When you are likely to meet it

• When the estate's debts exceed what it can pay.
• When a surviving spouse is living in a house owned by the person who died.
• When creditors ask about the house.

How this varies by state

Whether a state has a homestead protection, what it covers, and how much it is worth are set by state law and differ by an enormous margin.

Related terms

• Assessed valueWhat a taxing authority says a property is worth, which is rarely what it would sell for.
• Elective shareA surviving spouse's right to claim a minimum portion of the estate, even if the will leaves them less or nothing.
• EstateEverything the person owned at the moment they died, treated as one thing that has to be settled.
• Family allowanceMoney a court may allow a surviving spouse and dependent children to draw from the estate while it is being settled, ahead of most creditors.
• Insolvent estateAn estate that owes more than it holds. State law then decides who gets paid, in what order, and who gets nothing.
• Medicaid estate recoveryA state's claim against the estate of somebody whose long-term care Medicaid paid for, to recover what it spent.
• Property tax saleThe process by which a county sells a property, or a lien on it, because the property taxes went unpaid.
• Real propertyLand and what is permanently attached to it — a house, a barn, a fixed structure. Everything else a person owns is personal property.
• Secured and unsecured debtWhether a debt is attached to a particular thing. It decides who has to be paid, in what order, and what happens if the estate cannot pay everyone.
• Set-asideA court order handing a small estate straight to the family without any administration.
• Year's supportAn award to a surviving spouse and minor children that comes off the top of the estate, ahead of creditors.

Sahvelo guidance that uses this

• Debts after a death
• Inheriting a mortgaged home