By Attorney Maria Baler (August 2011)
A homestead is one of those “don’t leave home without it” estate plan documents that every Massachusetts homeowner can benefit from. A homestead protects the equity in your home against claims of creditors with a few exceptions. These exceptions include claims for unpaid taxes, your existing mortgage, a court order for support for a spouse or minor child, or an existing lien on the property. A homestead prevents your home from being sold to satisfy a judgment to the extent of the homestead protection. A homestead also protects the rights of family members to occupy the home as their residence. Homestead protection continues for the benefit of the spouse and minor children if the homeowner dies or if the homeowner and spouse divorce.
On March 16, 2011, a new homestead law took effect in Massachusetts, which provides all homeowners with some homestead protection and gives those who take additional steps added protection. Here are five facts you should know about the new homestead law.
1. Automatic homestead protection. The new homestead law provides that every homeowner in Massachusetts has an automatic homestead exemption of $125,000. If the home is owned by more than one person, the homeowners together share the $125,000 of protection. If the equity in your home exceeds $125,000, only a portion of your equity will be protected.
2. Declaration of Homestead. Homeowners who want more than $125,000 of homestead protection may complete, sign and file a Declaration of Homestead with the Registry of Deeds for the county where their home is located, declaring homestead in their residence. A declared homestead will protect the equity in your home up to $500,000. If the home is owned by more than one person, the homeowners together share the $500,000 of protection, except if the person declaring the homestead is age 62 or over, or is disabled – in which case that person is entitled to $500,000 of homestead protection. Any homeowner can file a declared homestead, including those who own a life estate interest in a home.
3. Existing homesteads continue. If you filed a Declaration of Homestead before March 16, 2011, your homestead protection will continue in effect. The amount of protection provided by your old homestead will be $500,000 and you will receive the benefits of the additional protections provided by the new law.
4. Home owned by a Trust. Under the prior homestead law, homestead protection was not available to homeowners who owned their home in a Trust. This created a dilemma for many homeowners who were forced to choose between the benefits of homestead protection and the benefits of ownership of their home in trust. The new law allows you to have your cake and eat it too by providing that Trust beneficiaries are entitled to homestead protection if the Trustees of the Trust file a Declaration of Homestead.
5. Only one home. Homestead protection is available only for a homeowner’s principal residence, not for vacation homes, timeshares, or other properties. However, a home can be a single family home, a multi-family home up to 4-family, a mobile or manufactured home, a condominium unit, or a unit in a residential co-op. If a home is sold, or if it is destroyed by fire or otherwise and insurance proceeds are received by the homeowner, those proceeds are also entitled to homestead protection for a period of time.
The homestead law can be complicated in some respects, and each homeowner should seek legal advice about his or her particular situation in order to ensure receiving the maximum homestead protection. If you would like to take advantage of the protection provided by the new homestead law, or if you are not sure whether you have filed a Declaration of Homestead, consult with your attorney. If you are like most homeowners in Massachusetts, a declared homestead will protect all of the equity in your home from claims of creditors, and will give you additional peace of mind knowing that you and your family will always have a place to call home.
Attorney Maria Baler is an estate planning attorney and a partner with the Dedham firm Samuel, Sayward & Baler LLC. She is also a director of the Massachusetts Chapter of the National Academy of Elder Law Attorneys (MassNAELA). For more information, visit www.ssbllc.com.