Middleton & Middleton

Asset and Creditor Protection

We know the work and effort our clients put into growing and protecting their wealth. Whether the client works in high-liability activities (doctors, physicians, business owners, construction, other professionals) or is mindful of litigation and the reach of creditors, we are capable of providing legal advice to help our clients plan for future liabilities in order to safeguard assets.

Unlike many states, Texas provides its residents with significant creditor protections through its Constitution and statutes. These protections allow individuals and business to limit a judgment creditor’s reach and serve to shield income and assets from execution in the event of a judgment. The following will briefly cover some of available the creditor protections in Texas.

Homestead Protection:

Homestead property under Texas law receives very favorable creditor protection under the Texas Constitution. Texas law allows for an unlimited homestead exemption from creditors. Client may acquire a home of unlimited value, with the entire value of the home being exempt from attachment. The only exceptions exist for the failure to pay a mortgage, failure to pay taxes, or failure to pay a home improvement or home equity loan.

Personal Property:

The Texas Property Code exempts up to $100,000.00 of Personal Property for a family and $50,000.00 for a single adult. Also protected are wages, prescribed health aids, and alimony.

Other miscellaneous property exempt from claims include burial plots, qualified retirement plans, pensions, profit sharing plans, Roth IRAs, Health Savings Accounts, College Savings Plans, and certain benefits under Life Insurance.

Additional miscellaneous property exempt from claims includes a Bible, home furnishings, 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, clothing, jewelry not to exceed 25% of the aggregate limitations, two (2) firearms, athletic and sporting equipment, a two-wheeled, three-wheeled or four-wheeled motor vehicle for each member of a family who hold a driver’s license, two horses, mules, or donkeys and a saddle, blanket, and bridle for each, twelve head of cattle, sixty head of other types of livestock, one hundred twenty fowl, and household pets.

Life Insurance/Annuities:

Texas law provides that an unlimited amount of benefits under a life insurance policy or annuity contract, including cash surrender value, are protected from creditor attachment. This applies regardless of whether the insured’s estate is the designated beneficiary.

There are three (3) exceptions: (1) premium payments made in fraud of a creditor, (2) debt of the insured or beneficiary secured by a pledge of the policy or contract, and a (3) child support lien.

Retirement Plans/College Savings Plan:

Texas law is highly favorable to individuals that have saved for retirement through certain retirement plans. There currently exists an unlimited exemption for retirement plan assets including qualified retirement plan benefits and tax-deductible contributions to IRAs, individual retirement annuities, and simplified employee pension plans, whether vested or not. All IRAs, including inherited IRAs, are protected from creditors. The key limitation (in the non-bankruptcy creditor protection context) is that contributions that exceed the deductible amounts under the Internal Revenue Code and accrued earnings on those excess contributions are not exempt.

College Savings Plans under section 529 of the Internal Revenue Code are fully exempt from the claims of creditors, even though donor retains the right to withdraw funds from the 529 plan.

Cash and investments held outside of retirement plans are not exempt assets and are the most vulnerable to a judgment creditor’s reach. Client should consider converting the cash and investments into homestead-exempt and personal property-exempt assets.


Texas law provides for Trusts with “spendthrift” provisions to protect assets of the Trust from creditors. However, this does not extend to self-settled Trusts (a Trust created by the Settlor for his or her own benefit). Texas law is not favorable to self-settled spendthrift trusts (although other jurisdictions do allow for such a tool). However, there are ways to structure lifetime and testamentary trusts for the benefit of a spouse and children to ensure that the assets are shielded from claims of creditors.

Other states, such as Nevada, allow for the creation of a self-settled spendthrift trust that may provide for protection against future creditors.

Corporate Assets:

Generally, the assets of a corporation cannot be reached to pay the debts of a shareholder. However, should a shareholder incur liability, the creditor can request and obtain a Receiver to exercise rights as to the stock like that of the shareholder (i.e., to receive a distribution).

Limited Partnerships and LLCs:

Limited partnerships and limited liability companies are legal entities that own property and maintain a business or investment purpose. A limited partnership or limited liability company can allow for unified management of the assets and pooling of investment resources of several owners (or a single owner who has gifted/conveyed ownership to other persons, such as family members).

The partners do not own the underlying assets, but instead own an interest in the entity. The partnership/membership interests are not exempt from creditors and can be subject to a charging order against the owner’s interest. But creditors will have difficulty reaching through the limited partnership to collect the assets within, as described below.

The general partner of a limited partnership or manager of a limited liability company can limit, or eliminate, any distributions from the entity to its owners, thereby cutting off any revenue source to creditors. As a result, creditors are often unable to collect on assets within a limited partnership.

Premarital and Postmarital Agreements:

Texas’ community property law system is often counter to a client’s personal understanding of their own property rights and financial liabilities. As a general rule, all property accumulated during marriage is the Community Property of both spouses, each holding a one-half share of such property.  A spouse can claim their own Separate Property, which is all property owned prior to marriage and maintained as separate during the marriage, and all property received by the spouse as a gift or by inheritance during marriage. These default rules can be modified through a Premarital Agreement (or Prenup) or a Postmarital Agreement or Postnup), which is in effect a legal contract between spouses.

Whether a first or second marriage, or more, clients should be mindful of their property rights both during marriage and after (whether the marriage terminates by death or divorce).  While often uncomfortable to discuss in the context of a pending marriage ceremony, careful planning and detailed marital agreements affecting property and rights in the marriage bear a significant benefit both for the client and their family. The attorneys at Middleton and Middleton have experience representing clients in preparing Premarital Agreements, Postmarital Agreements, and marital gifts and partitions in order to secure the client’s rights and protect them from their spouse’s liabilities.

Attorneys Practicing in Asset Protection

Michael W. Middleton


Mike has practiced law in Bryan/College Station since 1983. He is Board Certified in Estate Planning & Probate Law and is a Certified Public Accountant.

Andrew G. Middleton


Andrew joined Middleton & Middleton in 2014 after graduating from Texas A&M University School of Law. He is Board Certified in Estate Planning & Probate Law.

Areas of Expertise:

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