In re Cyr, 605 B.R. 784 (W.D. Tex. 2019).

Trusts

Homestead and "Qualifying Trust"

Property Code § 41.0021 allows a person to transfer his or her homestead into an inter vivos trust and have that property retain its homestead protections provided it meets the requirements of a “qualifying trust” such as allowing a settlor or beneficiary to unilaterally revoke the trust, exercise an inter vivos general power of appointment over the homestead property, or use and occupy of the property as the settlor’s or beneficiary’s principal residence at no cost to the settlor or beneficiary (other than payment of taxes and other specified expenses) for a permitted time period such as the life of the settlor or beneficiary. In this case, the settlors’ trust did not meet these requirements and thus the property that otherwise would have been homestead had it not been transferred to the trust was not protected when one of the settlors went bankrupt. For example, both settlors had to act jointly to revoke the trust; the debtor (bankrupt) settlor could not do so unilaterally.

 

Moral:  An inter vivos trust into which homestead property is transferred must strictly satisfy the requirements of a “qualifying trust” under Property Code § 41.0021(a) to retain homestead protection.

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