Qualifying Trusts for Property Tax Homestead Exemption
Recently the Potter-Randall Appraisal District (“PRAD”) has been sending letters to local residents who own their personal residence in a trust threatening to revoke those residents’ homestead property tax exemptions. This is an excellent opportunity to review the requirements for the homestead property tax exemption if you own your home in a trust.
Note that there are two different types of “homestead”—the protections from judgment execution generally and the specific property tax exemption granted by the local appraisal district. These are related and are often conflated since they both use “homestead” and have fairly similar requirements. Today we are discussing the property tax exemption only.
Section 11.13 of the Texas Tax Code provides for the homestead property tax exemption generally. In order for property owned by a trust to qualify for the homestead property tax exemption, the trust must be considered a Qualifying Trust.
“Qualifying trust”, under Texas Tax Code §11.13(j)(3) means a trust:
“(A) in which the agreement, will, or court order creating the trust, an instrument transferring property to the trust, or any other agreement that is binding on the trustee provides that the trustor of the trust or a beneficiary of the trust has the right to use and occupy as the trustor’s or beneficiary’s principal residence residential property rent free and without charge except for taxes and other costs and expenses specified in the instrument or court order:
(i) for life;
(ii) for the lesser of life or a term of years; or
(iii) until the date the trust is revoked or terminated by an instrument or court order that describes the property with sufficient certainty to identify it and is recorded in the real property records of the county in which the property is located; and
(B) that acquires the property in an instrument of title or under a court order that:
(i) describes the property with sufficient certainty to identify it and the interest acquired; and
(ii) is recorded in the real property records of the county in which the property is located.”
If you recently received a letter from PRAD about your homestead exemption, you can reach out to one of the board-certified estate planning specialists at Sprouse Shrader Smith, PLLC to review your Trust and help protect your property tax exemptions.
Article by Beau Cross
Posted May 5, 2022
