When it comes to asset protection in Texas, the law offers some of the strongest exemptions in the country. However, many Texans are surprised to learn that not everything they own is shielded from lawsuits, creditors, or judgments. Understanding which assets are protected—and how to protect those that aren’t—is essential to preserving your family’s financial future.
Whether you’re concerned about potential liability, future lawsuits, or just want to prepare for the unexpected, this guide explains what’s exempt, what’s exposed, and how a Family LLC structure can safeguard your wealth.
What Is Asset Protection in Texas?
Asset protection refers to legal strategies that protect your property from creditors and lawsuits. In Texas, certain assets are exempt by law, which means they can’t be taken to satisfy most judgments. But other assets—often the ones people work the hardest to build—remain exposed unless you take proactive steps to shield them.
Exempt Assets in Texas
Texas law provides generous protection for specific types of property. These exempt assets are off-limits to most creditors, even if someone gets a judgment against you. Common exemptions include:
1. Homestead
Your primary residence is protected from most creditors, regardless of its value or equity. This exemption is unlimited in amount, but it only applies to one home on 10 acres or less in an urban area, or 100 acres (200 for married couples) in a rural area.
2. Retirement Accounts
Qualified retirement plans such as IRAs, 401(k)s, and pensions are fully protected under Texas law.
3. Life Insurance and Annuities
The cash value and death benefits of life insurance policies are generally exempt if the beneficiary is a spouse, child, or dependent.
4. Personal Property Exemption
Up to $50,000 for a single adult or $100,000 for a family is protected for certain personal property. This includes:
- Household furnishings
- Clothing
- Tools of the trade
- Jewelry (limited to $12,500 for individuals, $25,000 for families)
- Two firearms
- One vehicle per licensed household member
5. Wages and Certain Benefits
Unpaid wages, alimony, child support, and most government benefits (like Social Security and workers’ comp) are also protected.
Assets That Are NOT Exempt
Unfortunately, not all property enjoys automatic protection. The following types of assets are at risk without proper planning:
- Rental Properties
- Vacation Homes
- Bank Accounts over the personal property limit
- Investment Portfolios (outside of retirement accounts)
- Business Interests or Income-Producing Equipment
- Boats, RVs, and Collectibles
- Equity in Non-Homestead Real Estate
These assets are fair game for creditors, lawsuits, and judgments—especially in professions or situations with higher liability exposure.
Using a Family LLC for Asset Protection
One of the most effective tools for protecting non-exempt assets is a Family Limited Liability Company (Family LLC or FLLC). This structure is especially popular in Texas because it helps protect property while maintaining control and providing estate planning benefits.
How a Family LLC Works
- You form an LLC under Texas law and contribute exposed assets (like rental properties or investment accounts) into the company.
- Ownership is divided into voting and non-voting membership interests, often held by family members or a trust.
- The LLC operates under a company agreement that limits control and restricts transfers.
Benefits of a Family LLC
- Liability Protection: Creditors of a member cannot seize assets inside the LLC. At best, they may get a charging order, which gives them rights only to distributions, not control.
- Control: Parents or founders can retain management authority even if membership interests are gifted to heirs.
- Valuation Discounts: For estate tax planning, minority interest and lack-of-marketability discounts may reduce the taxable value of the business.
- Centralized Ownership: Helps avoid fragmentation of family wealth and keeps assets consolidated under a single management structure.
What to Place in a Family LLC
- Rental or commercial real estate
- Excess bank and investment accounts
- High-value collectibles or equipment
- Business assets not already in an entity
Asset Protection Starts With Planning
Asset protection in Texas is only as strong as your plan. Exempt assets may already be protected, but anything outside those categories should be proactively addressed. A Family LLC isn’t a magic shield—but when structured properly, it can make your assets much harder to reach, and often less attractive to attack in the first place.
Whether you’re a small business owner, a real estate investor, or a parent wanting to safeguard your legacy, building asset protection into your estate plan is a wise move.
Why a Simple LLC Isn’t Enough
Many people assume that forming an LLC instantly protects their assets, but a basic or “off-the-shelf” LLC does not offer true asset protection. To be effective, the LLC must operate under a carefully drafted company agreement with specific provisions that limit the rights of creditors and restrict how membership interests can be transferred. Without this, a court may disregard the LLC’s structure—especially if it appears to be a personal piggy bank rather than a legitimate business entity. Key protective features include charging order limitations, transfer restrictions, management controls, and separation of personal and business activity. In short, forming an LLC is only the first step—the real protection comes from how it’s structured and managed.