Also known as: exempt asset · exempt property
Written by attorneys — see sources below.
A category of property that a debtor or surviving spouse may retain free from the claims of creditors or certain estate distributions. The classification protects designated items such as homestead interests, household goods, and allowances so that the protected party retains a minimal economic base after insolvency or death of a spouse.
Evelyn Ellison signed a written agreement before marrying Edward Everett that waived all rights to homestead allowance, exempt property, and family allowance. After Edward died, Evelyn sought to claim exempt property from the estate. The probate court enforced the agreement and denied the claim because the waiver was executed in writing and without duress.
Emanuel Escobar feloniously killed his spouse Eileen Epstein. He then petitioned the probate court for an exempt property allowance from her estate. The court ruled that the killing caused forfeiture of all benefits under the probate article, including the exempt property claim, and directed distribution as if he had disclaimed the interest.
Ezra Eastman and his spouse held their residence as tenants by the entirety. The United States obtained a tax judgment against Ezra alone and sought to attach the property. The court held that the federal tax lien could reach Ezra's interest in the tenancy despite state-law protections that might otherwise shield the asset from ordinary creditors.
In 1988, the Internal Revenue Service assessed $482,446 in unpaid income tax liabilities against Don Craft for his failure to file federal income tax returns for the years 1979 through 1986. At that time, Don Craft and his wife, respondent Sandra L. Craft, owned a piece of real property in Grand Rapids, Michigan, as tenants by the entirety. After notice of the federal tax lien was filed, the Crafts jointly executed a quitclaim deed purporting to transfer Don Craft's interest in the property to Sandra Craft for one dollar. When Sandra Craft later attempted to sell the property, a title search revealed the lien. The IRS agreed to release the lien to allow the sale on the condition that half of the net proceeds be held in escrow pending determination of the Government's interest. Sandra Craft then brought an action in the United States District Court for the Western District of Michigan to quiet title to the escrowed proceeds. The District Court granted summary judgment to the Government. On appeal, the United States Court of Appeals for the Sixth Circuit held that the tax lien did not attach to the property under Michigan law and remanded for consideration of the Government's fraudulent conveyance claim. On remand, the District Court found that the conveyance itself was not fraudulent but that the use of nonexempt funds to pay the mortgage constituted a fraudulent act, and it awarded the IRS a share of the proceeds. The Sixth Circuit affirmed that determination on the lien issue as law of the case. The Supreme Court granted certiorari to consider whether Don Craft had a separate interest in the entireties property to which the federal tax lien attached.
View caseEric Espinoza claimed a homestead exemption in residential property during divorce proceedings. His spouse Evelyn Ellison argued that the property did not qualify because Eric had not occupied it as his primary residence for the statutory period. The court examined the occupancy facts and denied the exemption because the statutory requirements were not satisfied.
Joseph A. Richardson and Ida Richardson divorced in December 1997. They executed a separation agreement providing that Joseph would pay Ida maintenance of $2,425.00 per month, terminating upon Ida’s remarriage or the death of either party. The agreement stated that its terms would not be subject to modification or change, regardless of the relative circumstances of the parties. The trial court incorporated the agreement into the Judgment and Decree of Dissolution and stated that maintenance was non-modifiable. In 2004 Joseph filed a motion to modify the judgment. In Count II he alleged that Ida sought out persons to burglarize his home, sought out persons to murder him, and attempted to hire a person to murder him. He further alleged that these acts breached the separation agreement, violated public policy, committed criminal acts, and waived any claim to maintenance. The trial court dismissed Count II with prejudice for failure to state a claim upon which relief can be granted. The dismissal order was certified as a final judgment and order under Rule 74.01(b). Joseph appealed the dismissal. The Eastern District Court of Appeals transferred the matter to the Supreme Court of Missouri.
View caseA surviving spouse may waive rights to exempt property only by a written agreement signed before or after marriage. The agreement is enforceable without consideration. Courts will not enforce the waiver if the spouse proves it was involuntary or the product of duress.
Supporting sources
An individual who feloniously and intentionally kills the decedent forfeits all benefits with respect to the decedent's estate, including exempt property. The estate then passes as if the killer had disclaimed the interest. This rule applies regardless of whether the killing affects probate or nonprobate transfers.
Supporting sources
Exempt property is initially included in the bankruptcy estate but is promptly returned to the debtor. Only nonexempt assets are used to satisfy creditors. Debtors may convert nonexempt property into exempt assets before filing, though courts scrutinize such conversions for fraud.
Homestead allowance, exempt property, and family allowance are payable in addition to any elective-share amount. The statute expressly provides that these allowances are not charged against the elective share. This separation ensures the surviving spouse receives both immediate support and a fractional share of the augmented estate.
Supporting sources
…played in "creating and defining" property interests. By erasing the careful line between state laws that purport to disclaim or exempt property interests after the fact, which the federal tax lien does not respect, and state laws' definition of property and property rights, which the federal tax lien does respect, the Court does…