Towne Tip: Excluded Assets Under HOTMA
HOTMA excludes six types of assets from net family assets: retirement accounts, federal tax refunds and refundable tax credits, education savings accounts, baby bond accounts, trusts, and non-necessary personal property with a combined total at or under the current HUD asset threshold. Real property is its own category and is not included in this list of exclusions.
The Six Exclusion Categories
Retirement accounts. IRA, 401(k), employer retirement plans, and self-employment retirement plans are IRS-recognized and excluded from net family assets entirely. If the household is receiving regular distributions from the account, document that distribution as income. If no distribution is being taken, no documentation of the account itself is required.
Federal tax refunds and refundable tax credits. Any refund or credit received within the last 12 months is excluded. Obtain verification of the total amount received, then subtract that amount from the household's total net family assets, regardless of which account the refund was deposited into.
Education savings accounts. Coverdell accounts under IRC §530, qualified tuition programs under §529, and ABLE accounts under §529A are all excluded, with the same documentation rule as retirement accounts, verification only becomes necessary if a distribution is actually received.
Baby bond accounts. Any account created, authorized, or funded by a federal, state, or local government, held in trust for a child until adulthood, is excluded. Connecticut's CT Baby Bonds program and California's HOPE for Children program are two currently operating state examples. In July 2026, the federal government established 530A accounts, a one-time $1,000 federal contribution to an IRA-style account for eligible children. It's not yet confirmed whether these fall under this exclusion category, the retirement account exclusion, or a category HUD hasn't yet addressed in guidance. Confirm current HUD guidance before treating a 530A account as automatically excluded.
Trusts. The exclusion depends on the trust's structure, not simply whether it's called a trust. An irrevocable trust is excluded in full, regardless of who benefits from it. A revocable trust is excluded only if the family doesn't control it, meaning the grantor is someone outside the household. If the grantor is a household member, the trust is included in net family assets, and any actual income the trust earns is included in the household's income too.
Non-necessary personal property under the combined threshold. Items like a recreational boat, a coin collection, or jewelry with no religious or cultural significance are non-necessary personal property. If the combined value of everything in this category stays at or under the threshold, $52,787 for a certification effective before January 1, 2027, or $54,898 for one effective on or after that date, none of it counts toward net family assets. If the combined total exceeds the applicable figure, the full amount counts.
Working Through Three Examples
The tool below walks through three examples, a 401(k) statement, a Declaration of Trust, and a Personal Property Value Summary, each with its own short decision path.
Work through all three. The trust example in particular shows how the same category of asset can land on opposite outcomes depending entirely on one detail, who controls it, and the personal property example shows how the same dollar total can flip from included to excluded based only on a certification's effective date. of the three lands on included rather than excluded.
TOWNE HOUSING COMPLIANCE
Recognizing Excluded Assets: Three Worked Examples
Choose a document below. You'll work through the same questions you'd ask in a real file to determine whether the asset it represents counts toward net family assets.
