The Massachusetts Homestead Protection Act is one of the biggest no- brainers for any homeowner in Massachusetts to take advantage off.
Quite simply, an estate of homestead is protection for a persons residence from most creditors. The declaration of homestead protects the equity in your home for up to $500,000 in the event you are sued. In other words, if you are sued, $500,000 of your equity could not be touched by an attachment and subsequent levy on execution of sale. Unfortunately today we live in a litigious sue happy society. The chances of getting into an accident and someone suing you can not be overlooked!
The Homestead form is filed at the registry in the county that your home is located in. All that is required is the preparation and recording of a Declaration of Homestead and the payment of a state recording fee. The total cost is typically around $100 to prepare and record the instrument. You could ask your attorney to prepare this document for you or possibly even the lenders attorney if you don’t have legal representation with your home purchase.
If you are married it only needs to be filed by one person and the other spouse is protected as well. You will typically see this document filed at the registry with all the rest of the closing papers on the purchase of a home.
There are some things that the homestead declaration does not protect against.
The following are exempt from the Homestead Law:
- Federal, state and local taxes, assessments, claims, and liens;
- Mortgages used to purchase the residence, and in the case of the elderly homestead, first and second mortgages held by financial institutions or others;
- An execution issued from the Probate Court to enforce its judgment that a spouse pay for the support of a spouse or minor children;
- Where buildings on land not owned by those declaring of a Homestead estate are attached, levied upon or sold for the ground rent of the lot whereon they stand;
- Upon an execution issued from a court of competent jurisdiction to enforce its judgment based upon fraud, mistake, duress, undue influence or lack of capacity;
- Debts contracted prior to the acquisition of the homestead.
The protection only extends to one primary residence. You can not have homestead protection on multiple properties.
There are some changes that have been proposed that would change how the mechanics of how the Massachusetts Homestead Protection works.
The new bill was filed on January 2nd 2010 and is known as House Bill No.1584. Below is a summary of the changes:
Automatic Homestead. The bill as proposed would automatically provide protection up to $125,000 of home equity for all homeowners, regardless of whether the homeowners have filed a declaration or not. Homeowners who record a homestead declaration would still receive protection of their equity up to $500,000.
Signature. A flaw in the homestead protection statute is that only one of the owners may file a homestead in any home. Under the current statute, joint owners, including spouses, currently have to decide which of them is more likely to have liability for a claim that is not covered by insurance or who is more likely to get sued. The proposed Bill would allow both spouses to file, even if only one spouse is named on the title.
Second Homestead. Under the new Bill, a second homestead filing would relate back to the date of the first filing. This would protect against liability incurred between the two filings that could compromise the second declaring parties equity.
Trust. Completely changing the current statute, the Bill would provide protection to beneficiaries of trusts that hold title to the residence, provided that the home is, in reality, the beneficiaries’ principal residence.
Transfer of Title Between Spouses and Co-owners. Currently, spouses or co-owners who transfer title between themselves without explicitly retaining homestead rights inadvertently terminate their right to protection. Under the new homestead protection act, transfers among family members will not terminate a previously declared homestead even if the homestead is not reserved in the deed.
Home Sale Proceeds. Under the current homestead protection law there is no protection for homeowners who sell their home and do not immediately reinvest the proceeds in a new principal residence. With the new revision proceeds from the sale of a home would be protected for up to a year and two years for casualty/insurance proceeds.
Mortgage. Lastly, the Bill would prohibit mortgage lenders from requiring homeowners to terminate their homestead rights in order to secure a mortgage.
Whether these new modifications take place or not, having Massachusetts Homestead protection is one of the wisest investments any home owner can make!
UPDATE ~ As of December 2010 the Massachusetts Homestead amendment has passed. The highlights of the bill as described above are the automatic homestead protection up to $125,000 without having to file a homestead document at the local registry, homestead remaining valid if the home is transferred to another family member, homestead remaining in force under a refinance, as well as providing additional protection for home owners who receive insurance proceeds from fire or other damages.
The homestead protection act also now provides coverage for those who have put their home in a trust. Lastly, closing attorneys in mortgage transactions must now provide borrowers with a notice of availability of a homestead.
About the author: The above Real Estate information on the Massachusetts Homestead Protection Act was provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at firstname.lastname@example.org or by phone at 508-435-5356. Bill has helped people move in and out of many Metrowest towns for the last 24+ Years.
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