What Happens To Homestead Property In Texas When A Parent Dies Leaving A Minor Child?

Homestead property in Texas inures at death and is exempt from claims of the estate.  In Caceres v. Kerri Grahamas Dependent Adm’r of the Estate of Alicia Maribel Procell, Case No. 14-18-00826-CV, the Texas Appeals Court, Fourteenth District, Houston, addressed what happens to Texas homestead property when a parent dies leaving a minor child.

The Facts of Caceres

Decedent Alicia Maribel Procell was survived by her four children, as determined by the court’s judgment determining heirship.  One of Alicia’s children, Jennifer, was a 16-year old minor when Alicia died.  The estate was insolvent and could not pay the medical expenses of Alicia’s final illness.

The court set aside Alicia’s real property as homestead property, which was exempt from claims against the estate.   The court ordered that upon Alicia’s death, fee simple title to the property vested equally in the four children.

A dependent administrator was appointed.  The administrator’s inventory, appraisement, and list of claims included the homestead property and represented that the estate had a claim for the rental income from the homestead.

Despite the previously-entered order of homestead, the trial court overruled two of the children’s objections to the inventory, appraisement, and list of claims.  The Texas trial court granted the administrator’s motion to terminate the property’s homestead protection and subject the property and its income to the dependent administration.

What Happens Under Texas Law When A Parent Dies Leaving A Minor Child, An Insolvent Estate, Real Property, And No Surviving Spouse?

“Where, as here, a parent dies leaving a minor child, an insolvent estate, and no surviving spouse, a property’s status as a homestead carries with it three rights.”

The Homestead Is Set Aside And Is Not Liable For Debts

First, on application by a person authorized to act on the minor’s behalf, the court must “set aside . . . the homestead for the use and benefit of . . . the minor children.” Tex. Est. Code Ann. § 353.051.

With a few narrow exceptions, the homestead is not liable for the payment of any of the estate’s debts.  See Tex. Const. art. XVI, § 50; Tex. Est. Code Ann. § 102.004.

Instead, the decedent’s children share “absolute title” to the homestead. Tex. Est. Code Ann. § 353.153.

A Minor’s Guardian Can Use and Occupy The Homestead

Second, a trial court has discretion to permit a minor’s guardian to “to use and occupy” the homestead under a court order. Tex. Const. art. XVI, § 52; Tex. Est. Code Ann. § 102.005(2); Cline, 117 Tex. at 477, 8 S.W.2d at 634.

The Homestead May Not Be Partitioned As Long As Used And Occupied By Guardian Of The Minor

Third, the homestead may not be partitioned among the decedent’s heirs for so long as the trial court permits the guardian of the decedent’s minor children “to use and occupy” the homestead. Tex. Const. art. XVI, § 52; Tex. Est. Code Ann. §§ 102.005(2), 102.006(2).

Is Inclusion of Texas Homestead Property In An Administrator’s Inventory Per Se Erroneous?

No, the Texas Estate Code appears to permit the inclusion of a Texas homestead property in the inventory. As reasoned by the Texas Court of Appeals:

“Estate” is statutorily defined to include all of a decedent’s property, and the homestead falls within that broad definition. See Tex. Est. Code Ann. § 22.012. The homestead is classified as “exempt property,” which is defined as “the property in a decedent’s estate that is exempt from execution or forced sale by the constitution or laws of this state.” Id. § 22.013 (emphasis added).

A trial court can set aside a homestead property before or after the inventory is filed. However, homestead passes upon death, and therefore inclusion on the inventory does not operated to change a property’s status from homestead to non-homestead.

Does An Estate Have A Claim For Rental Income From Texas Homestead Property?

No, the Texas estate does not have a claim for rental income from the homestead property.  Because the homestead passed to Alicia’s children upon her death (subject to any post-death transfers by the children), the children are the owners of the homestead and its income:

As the Supreme Court of Texas explained over a hundred years ago, “if the rent did not fall due until after the death of the [parent], then the rent would constitute no part of the estate, but would vest in the children by reason of their being the owners of the land, out of which the rents issued.” Porter v. Sweeney, 61 Tex. 213, 216 (1884).

Does A Texas Real Property’s Homestead Status Terminate When A Minor Beneficiary Reaches The Age of Majority?

No, a Texas real property’s homestead status does not terminate when a minor beneficiary reaches the age of majority.

Here, the dependent administrator argued that the minor’s homestead rights should be terminated because she had reached the age of majority, and rental income should be turned over to the estate.  The administrator confused the homestead’s status as exempt from estate creditors with a minor’s right to occupancy.

Because Jennifer reached the age of majority and no longer had a guardian, there was no one to grant the right of occupancy, and this could not operate as a barrier to a co-owner seeking partition.  However, the loss of that defense does not affect the property’s homestead status.

As the Third Court of Appeals has explained, “the mere existence” of a minor child “is sufficient to cause the homestead to descend free of debt.” Nat’l Union Fire Ins. Co. of Pittsburgh, Pa. v. Olson, 920 S.W.2d 458, 461 (Tex. App.-Austin 1996, no writ). “Because the existence of a surviving constituent family member is the determining factor, the status of the homestead is immediately ascertainable upon the death of the decedent.” Id. at 462. The Olson court therefore concluded that “[o]nce the homestead passes free of debt, it never becomes subject to the debt.” Id.

Here, the homestead passed free of claims by or against the estate to the decedent’s children upon their mother’s death, and it continues to be exempt homestead property even though Jennifer is no longer a minor.