What Assets Are Protected From Creditors in Texas?
I get a lot of calls and emails from individuals interested in protecting their assets. Some ask whether it would be beneficial to create an asset protection trust for their own benefit. Often, they do not have large estates or unusual risk factors. Rather, they have read or heard about how litigious our society is and want to take whatever steps necessary to protect what they have.
Does Texas Have a Domestic Asset Protection Trust Statute?
Texas does not have a domestic asset protection trust law, although some fairly recent amendments to the spendthrift statute has created a back door to creating self-settled asset protection trusts in Texas.
Asset Protection in Texas Without a Trust
Fortunately, Texas law already provides a good deal of asset protection for certain types of assets even without a Trust. For example:
- Texas law protects your homestead from forced sale to pay most debts and judgments. In Texas, up to ten acres of an urban family home, plus improvements, and up to 200 acres in rural areas (100 acres for single adults) are protected, regardless of how much the property is worth. Claims from mortgage lenders, the IRS, governments who are owed property taxes, and some homeowners associations are limited exceptions to this rule.
- Additionally, personal property with an aggregate value of $60,000 for a family and $30,000 for a single person is protected. These include items such as:
- Home furnishings, including family heirlooms.
- Provisions for consumption.
- Farming or ranching vehicles and implements.
- Tools, equipment, books, and apparatus, including boats and motor vehicles used in a trade or profession.
- Wearing apparel.
- Jewelry not to exceed 25 percent of the applicable aggregate limit.
- Two firearms.
- Athletic and sporting equipment, including bicycles.
- A two-wheeled, three-wheeled, or four-wheeled motor vehicle for each member of a family or single adult who holds a driver’s license or who does not hold a driver’s license but who relies on another person to operate the vehicle for the benefit of the nonlicensed person.
- The following animals and forage on hand for their consumption: 2 horses, mules, or donkeys and a saddle, blanket and bridle for each; 12 head of cattle; 60 head of other types of livestock; and 120 fowl
- Household pets.
- Unpaid commissions for personal services not to exceed 25 percent of the aggregate limits.
- Other protected assets include your retirement accounts, 529 college savings accounts, life insurance proceeds, and annuities.
Do I Need an Asset Protection Trust in Texas?
For most people, their homes and retirement account encompass the bulk of their assets. As a result, they already have a lot of asset protection built right in. For added risk management, it is possible to form an LLC for a business interest.
Additionally, purchasing an umbrella insurance policy offers good protection from major claims and lawsuits that other liability policies may not cover.
If you have different assets or more significant exposure, an attorney can advise you on what type of estate planning will offer you the most protection based on your unique circumstances.
This article was originally published on June 4, 2014, and updated on May 2, 2023.