Contributions to a qualifying individual retirement account (IRA) such as a regular IRA, Roth IRA, Simple IRA, or SEP IRA are immune from creditor claims under Section 42.0021 of the Texas Property Code. Only the amount of contributions that are deductible under the federal tax code are eligible for the exemption. As of 2011, the total amount that can be exempted for regular and Roth IRAs created under Section 408 or 408a of the IRS law is restricted to $1,171,650. Contributions to a Simple or SEP IRA plan are not subject to the exemption restriction.
Can my IRA be taken in a lawsuit in Texas?
The monies you withdraw from your IRAs are similarly exempt for 60 days following the date of distribution when you take distributions.
Q. I bought a $9,000 truck for my brother-in-law two years ago and registered it in his name. He died about a year ago, and the truck was returned to me by his heirs. The issue is that they are unable to locate the title. He had a will, but probate is unlikely to be required. How can I get some salvage value for the truck if I sell it?
A. You should be able to alter the title to the person or persons who inherited the vehicle from your brother-in-law using DMV Form VTR-262 (named “Affidavit of Heirship for a Motor Vehicle”). The form can be found at www.txdmv.gov.
The person (or people) who take title can then either sell the truck and give you the money, or they can give it to you and you can sell it.
Using this technique, however, increases the risk that the vehicle will be passed on to someone who is unwilling to cooperate with the plan to return it to you.
What assets are exempt from lawsuit in Texas?
- Your homestead, up to 10 acres of urban property (single or family), 100 acres of rural property (single), and 200 acres of rural property (family). NOTE: Your homestead may be foreclosed if you fall behind on your mortgage, property taxes, or home equity payments. If you take out a home equity loan to pay off credit card debts or medical bills, you risk losing your home if you default on the loan.
- Two firearms, instruments of your profession, sporting equipment, bicycles, two horses, 12 head of cattle, and other items are all exempt.
The stuff in your home
The home’s typical contents are safeguarded. Furniture, dishes, furnishings, clothing, and food are all examples of this. Televisions, radios, and other electronic devices are not protected.
Your wedding ring
In fact, personal jewelry worth up to 25% of your exemption amount can be protected. A single person can safeguard up to $30,000.00. A family’s assets can be safeguarded up to $60,000.00.
Can you lose your IRA in a lawsuit?
If you are sued and must pay a settlement, creditors may be entitled to access your retirement resources. IRA money are nearly never safeguarded in the case of domestic relations cases.
Are IRAs exempt from creditors?
- Up to $1,283,025, the assets in an IRA and/or Roth IRA are protected from creditors.
- Even after they’ve been rolled over to an IRA, all assets in ERISA plans are shielded from creditors.
Can IRAs be garnished?
There are no federally legislated exclusions from IRA garnishment, with the exception of a partial exemption for bankruptcy. 4 As a result, your retirement savings could be seized to pay off any outstanding government bills. The most common reason for a federal garnishment of an IRA is to pay back taxes to the IRS.
Can you lose your home in a lawsuit in Texas?
The type of property that can be taken in a judgment is anything which does not fall under one of the several exemptions provided by the Texas Constitution, Texas Property Code 41.001, Texas Property Code 42.002, Texas Property Code 42.0021, the Texas Homestead Law, and other applicable statutes. That sounds like a lot of legal safeguards, and it is. Texas is a virtual fortress against creditors, and it is one of the least likely states in the country to lose a judgment.
Property that can be confiscated in a judgment represents a small percentage of what most households own. To a person facing collection operations, the types of property that can be seized may appear to be a luxury – such as jewelry worth more than a particular amount, a hunting or fishing cabin, or a timeshare or other vacation house.
Exempt Property in Texas
If you are facing a creditor’s judgment, you should be aware that the state of Texas provides a number of property protections for low-income families that date back to the state’s early inhabitants. Many of these settlers were looking to start over and get away from the financial responsibilities of judgments in their home states.
These are known as “exemptions,” and the property covered by them is known as “exempt property.” Under the Texas Constitution, Texas Property Code 41.001, Texas Property Code 42.002, Texas Property Code 42.0021, the Texas Homestead Law, and/or other applicable state statutes, the following assets cannot be seized in a lawsuit:
- A debtor’s primary urban or rural residence, as well as the property surrounding it (the “homestead”)
The things listed above, as well as many more, are excluded from debt collection under Texas law, and the owner can claim exemption from judgment enforcement if a creditor tries to seize these assets.
Our responses to some of the most frequently asked questions about exempt property in Texas are based on these legislative exemptions.
Can a Creditor Take My Car?
One of the most frequently asked questions is, “If I lose a judgment, can a judgment creditor seize my car?”
There are a few things to consider when it comes to automobiles. If you financed your automobile, you may have agreed to a contract that provides the bank the legal authority to repossess the vehicle after a specific number of missing payments. This scenario, however, is a subject of contract law, and it is distinct from the idea of a judgment creditor being allowed to repossess your vehicle after you lose a judgment. (As a result, if circumstances are bad, keep in mind that you should always pay your car bill before any unsecured debts, such as credit card bills.)
Texas Property Code Section 42.002 (9), “A two-wheeled, three-wheeled, or four-wheeled motor vehicle for each member of a family or single adult who has a driver’s license or who does not have a driver’s license but relies on another person to operate the vehicle for the non-licensed person” is exempt from seizure as part of a judgment. This means you’ll probably still have your car to get to work, your teenager or young adult will probably still have their car to get to school, and you’ll be able to keep your personal affairs running while you work to resolve the decision against you.
Can a Creditor Take My House?
Another typical question we get is whether your residence can be taken over by creditors. In Texas, a creditor cannot seize your primary residence through a real estate judgment or other means of judgment enforcement.
According to Texas Property Code 41.001, a “homestead” is defined as a house and up to ten (10) acres of land in an urban area such as the Houston-Galveston Metro area; a house and up to one hundred (100) acres of rural land for a single person; and a house and up to two hundred (200) acres of rural land for a family.
Non-Exempt Property in Texas
What rights do creditors have over you? “Non-exempt property” is the answer. Anything that is not exempt from debt collection under the Texas Constitution, Texas Property Code 41.001, Texas Property Code 42.002, Texas Property Code 42.0021, the Texas Homestead Law, and other applicable statutes is considered non-exempt property.
This is the type of property that can be confiscated in a court of law. Start with the applicable legislation and seek for exemptions, then make an itemized inventory of what you have and where it falls. Anything that goes outside of the exception, which is likely to be a modest amount of property, could be seized.
What assets are protected in a lawsuit?
- Medical professionals and corporate executives aren’t the only ones who may face legal action and need to safeguard their assets.
- In the interest of justice, many investment accounts, such as individual retirement accounts (IRAs), come with some level of protection.
- Many states now offer asset protection trusts that cover homesteads, annuities, and life insurance, in addition to federal regulations that protect retirement plans.
What assets Cannot be seized in a Judgement?
Certain types of property have been declared as “exempt” by all states, meaning they are not subject to seizure by judgment creditors. Clothing, basic household furniture, your home, and your car, for example, are frequently exempt, as long as they aren’t worth a lot of money. Any non-exempt property you own, on the other hand, can be used to pay off your debts.
Secured Property Is Still at Risk
Regardless of the exemptions available, if you are still paying payments on a big purchasetypically a home or caryour creditor will almost certainly have a lien on the property to obtain repayment. This type of loan is known as a “secured” debt. If you fall behind on your payments, you may face foreclosure or repossession of the property that serves as collateral for the loan.
Negotiating to Keep Nonexempt Property
If an exemption does not apply to a specific item of property, you may be able to work out a deal with the creditor to keep it. You could, for example, offer to pay the creditor the property’s value in cash or another item of exempt property of about comparable value instead. In addition, if selling the asset would be too costly or inconvenient, the creditor may reject or “abandon” it. In that scenario, you get to keep it as well. So keep in mind that even if we tell you that you must give up property, you may be able to negotiate with the creditor regarding whatever property is taken.
Is your home protected in a lawsuit in Texas?
There is no domestic asset protection trust statute in Texas. Fortunately, even without a Trust, Texas law offers adequate asset protection for certain categories of assets. Consider the following scenario:
- Your homestead is protected by Texas law from being forcibly sold to pay off most debts and judgements. In Texas, no matter how much the property is valued, up to ten acres of an urban family home, plus improvements, and up to 200 acres in rural areas (100 acres for single individuals) are protected. The only exceptions to this rule are claims from mortgage lenders, the IRS, governments owing property taxes, and some homeowners organizations.
- Personal property with a total worth of $60,000 for a family and $30,000 for an individual is also protected. These include things like:
- Tools, equipment, literature, and apparatus used in a trade or vocation, including boats and motor vehicles.
- A two-wheeled, three-wheeled, or four-wheeled motor vehicle for each family member or single adult who has a driver’s license or does not have a driver’s license but relies on another person to operate the vehicle for the nonlicensed person’s benefit.
- For their consumption, the following animals and forage are available: 2 horses, mules, or donkeys, each with its own saddle, blanket, and bridle; 120 fowl; 12 head of cattle; 60 head of other livestock; and 12 head of fowl
- Unpaid commissions for personal services are limited to 25% of the total budget.
- Retirement accounts, 529 college savings accounts, life insurance payouts, and annuities are all examples of assets that are safeguarded.
The majority of people’s assets are their homes and retirement accounts, which means they already have a lot of asset protection built in. Forming an LLC for a business interest might help with risk management.
Furthermore, having an umbrella insurance coverage protects you against big claims and litigation that other liability plans may not cover.
What garnishments are allowed in Texas?
Wage garnishment is often thought of as a mechanism for debt collectors to withdraw money from a person’s paycheck. The Texas Constitution prohibits wage garnishment except for a few types of debt: child support, spousal support, student loans, and overdue taxes. For routine debts, a debt collector cannot garnish your pay.
Texas, on the other hand, allows for the freezing of a bank account. The monies in your bank account can be frozen and perhaps seized once your wages are deposited. A debt collector must have won the litigation and received a court order in order to do so. This can be perplexing because the order is referred to as a “writ of garnishment,” but it cannot be used to garnish incoming income.