Home Sweet Homestead
Massachusetts recognizes the importance of the family home and has created an inexpensive, yet powerful, way to protect it in Massachusetts General Laws chapter 188. Every homeowner with a primary residence in Massachusetts should have a Declaration of Homestead recorded at the appropriate registry of deeds.
A common example where the Homestead protection is used occurs when a homeowner has been involved in a car accident which causes serious injury. In Massachusetts, the required automobile insurance for this type of claim is set at only $20,000. If a court awards the injured person an amount higher than the insurance coverage, that person may then look to the personal assets of the other driver for payment, which will usually be the driver's home. However, if the driver has previously recorded a Homestead declaration, the home cannot be attached, levied or sold to pay that debt during the time the family resides in the home. The Homestead has saved the home from a forced sale. This same protection applies to other debts, including credit card debt.
A Homestead declaration can protect up to $500,000 of home equity for an owner who occupies the home as their primary residence. The protection is for debts that arise after the Homestead is recorded. Homesteads are limited to one per family, which includes a parent and children, a husband, wife and children, or a sole owner. Once recorded, the Homestead will also protect the homeowner's spouse and any minor children. Homesteads are also made available to co-owners, such as a joint tenant or tenant in common, and for unrelated individuals who are not married, each individual may file a Homestead.
For elderly or disabled homeowners, the law provides the same amount of protection but, here, a single Homestead declaration will not protect the home from the debts of other family members. Each member of the family who is eligible (i.e. elderly or disabled) must record a separate Homestead to obtain protection.
It is important to note that the Homestead declaration will not protect the home from every debt. The law excepts six items which will not qualify for protection: (1) debts secured by the home (mortgage debt); (2) tax claims; (3) claims for spousal or child support obligations; (4) no protection when the building is located on land that the homeowner does not own; (5) court awards based on fraud, mistake, duress, undue influence or lack of capacity; and (6) debts or liabilities arising before the Homestead declaration is recorded. It is also generally settled that a Homestead will not provide protection for certain government liens, such as liens imposed for the repayment of Medicaid (nursing home) benefits.
Also, care must be taken not to mistakenly terminate a previously filed Homestead and leave the equity in the home completely exposed to creditors. To avoid this disastrous result, you must be familiar with the following situations that will terminate your protection: (1) any transfer of the property, including a refinance, unless the Homestead is specifically reserved; (2) failing to use the home as a primary residence; (3) a written release by the homeowner; (4) death of the homeowner, except in the case where protection continues for a spouse and minor children; and (5) filing a subsequent Homestead will terminate the protection under the earlier Homestead. This trap for the unwary will expose the homeowner to debts that were incurred after the first Homestead but before the second.
Despite the limitations of the Homestead, it still affords a great amount of valuable, yet, inexpensive protection from a variety of claims. The homeowner can expect to pay a modest fee to have the form prepared by an attorney, along with a separate $35 fee to the registry of deeds for recording the document.
If you own a primary residence in Massachusetts, you should be certain that you have this protection for your home. If you are unsure if you have this protection, or under which section of the law you should file, contact your attorney and protect your most important asset — your family home.
William M. Sheridan, Jr. is an Associate with the law firm of Doherty, Ciechanowski, Dugan & Cannon, P.C. He practices in the areas of Estate and Asset Protection Planning, Elder law and Probate Administration. William may be reached at (508) 359-5114 or via email at wms@dcdclaw.com.
DISCLAIMER: The information presented here is provided with the understanding that it does not constitute legal advice in any manner. It is provided for informational purposes only and should not serve as a substitute for consulting with a qualified attorney.