The New and Improved Homestead Law in Massachusetts: Ignoring This Could Devastate Your Financial Health.

On December 16, 2010, the Governor approved significant and very beneficial changes to the Massachusetts Homestead provisions.  What does the Massachusetts homestead provision do?  The homestead law operates to protect your home from being sold to pay your unsecured creditors.  For example, if you were in an auto accident and were left with liability of $200,000 not covered by insurance and the plaintiff in the lawsuit obtained a judgment against you, a properly filed Massachusetts homestead declaration could prevent your home from being sold.  If you did not have a declaration of homestead on file with the Registry of Deeds, a judgment creditor could force the sale of your home to pay your liability. 

Under the old homestead law there were some significant problems.  If you did not file a declaration of homestead with the registry of deeds you had no protection.  In addition, if you owned the property under a trust arrangement, you risked losing your homestead protection.  In the estate planning area there are significant benefits from holding real property in trust.  Unfortunately, if you held your home in trust it meant that you risked  the homestead protection that was so beneficial. 

The new law goes into effect on March 16, 2011.  Please note that the new legislation specifically indicates that declarations of homestead which are in effect on the effective date of the new provisions will remain valid.  Therefore, if you have a valid homestead there is no need to record a new homestead.  However, if you own your home in a trust, after March 16, 2011 you should file a declaration of homestead with the registry of deeds. 

The highlights of the new homestead provisions are as follows:

  • There is an automatic homestead exemption that applies to all homes of up to $125,000.  You do not have to do anything to benefit from this automatic homestead protection for your primary residence;
  • The new homestead provisions apply to primary residences that are held in trust.  The declaration of homestead needs to be filed by the trustee of the trust and the homestead protection operates to protect all family members;
  • The filing of a written declaration of homestead with the Registry of Deeds increase the equity that is protect up to $500,000 (the current homestead protection);
  • If you are elderly (age 62 and over) or disabled, a husband and wife can both claim a homestead amount of $500,000 thereby protecting up to $1,000,000 under the homestead provisions.    
  • You can only claim a homestead on one primary residence.  You cannot have more than one primary residence for homestead purposes; 
  • The homestead law does not prevent mortgage holders from foreclosing against the property; 
  • The cost to record a declaration of homestead at the registry of deeds is only $35.00. 
  • The proceeds from the sale of real property covered by the homestead law are also protected.  This means that you can sell your home and the proceeds from the sale of the home (up to $500,000 if you have a written declaration of homestead filed) is free from collection by any creditors. 

If you don’t know if you have a homestead filed with the registry of deeds on your primary residence you need to find out!  Massachusetts offers one of the most generous homestead provisions in the country.  It is a very easy way to help protect one of your main assets and there is no reason why you should not have a homestead filed on your house.

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