By Mark Lichtenstein, Esq. ~ By Robert A. Finkel, Esq.
Homesteads are an affordable way for many of our clients to obtain significant protection from certain creditors. On December 16, 2010, the governor of Massachusetts signed into law the most extensive changes to our homestead law in more than a generation. The effective date of the new law was March 16, 2011. This bulletin does not review all of the provisions of the law, but provides a general background. If you are not sure whether you have a Declared Homestead, whether you qualify, or whether you should consider changes to your existing Homestead, we would be glad to discuss with you your specific circumstances.
Here are some of the new law’s principal provisions:
- Homeowners are provided Automatic Homestead protection of up to $125,000 for their principal place of residence.
- Declared Homesteads with an exemption amount of $500,000 are available by executing a Declaration of Homestead form and recording it at the appropriate Registry of Deeds or by filing it at the appropriate Registered Land Division of the Land Court (as applicable to your property).
- For married homeowners, both spouses must now sign the form; if one spouse is not on title, the form must identify the non-owner spouse to obtain the homestead protection. Married homeowners who have an existing homestead declared by one spouse need not update their homestead. When a single homeowner subsequently marries, the spouse automatically becomes entitled to the benefits of the homestead.
- Anyone who already has a homestead prior to March 16, 2011 will continue to have homestead protection.
- Homestead protection is now afforded to a beneficiary of a trust, where the trust takes title to a home and the beneficiary intends to occupy the home as his/her principal place of residence. The trust beneficiary must be identified in the Homestead Declaration form as the beneficiary. The trustee, not the beneficiary, must execute the form.
- Multiple owners of a principal residence may benefit from homestead protection, but the aggregate exemption amount is limited to $500,000.00. In the case of elder (62 and over) and disabled owners, the aggregate protection for the principal residence may be up to $1,000,000.00.
- The execution of a deed among family members or co-owners will not release the homestead. A homestead existing at death or divorce will continue in effect for the benefit of the surviving spouse and minor children (but not adult children) for whom the home is their principal residence. However, a homestead will be released by a deed from the owner and the non-owner spouse (if any) to a non-family member. Homesteads may also be released by either recording a termination of the homestead, signed by both the declarant of the homestead and the spouse, the recording of a new Declaration of Homestead, or by abandonment of the property as a principal place of residence.
- Homesteads created under the new law will be automatically subordinate to mortgages encumbering homes. Lenders are not permitted to request a release of homestead in connection with the granting of a mortgage.
- When a home is sold, the closing proceeds receive homestead protection for one year, and in the event of an insured loss, insurance proceeds receive protection for a period of two years.