Don’t Forget to Take Advantage of Homestead Act Protection

Your home is your refuge and your stronghold. Given the high price of real estate, it may be your most significant investment.

Unfortunately, your house, like everything else you own, is potentially at risk. If you were to be sued, or some other incident were to put you in debt, creditors could seize your home. But there are some key steps you can take to protect the value in your house through the Massachusetts Homestead Act. The law provides some wonderful protection for homeowners, but you must take affirmative action to gain the full protection offered by a homestead declaration.

What is a Homestead?

At the most basic level, a homestead is a residential property occupied by the owner. If you own more than one property, your primary residence could be designated as your homestead. The Massachusetts Homestead Act provides protection from creditors for properties that qualify as homesteads.

In Massachusetts, a homestead can have more than one owner. Even someone with a life estate or a beneficial interest in a trust can be considered an owner for the purpose of homestead protection. The homestead may be a single-family home, townhouse, condominium, or mobile home.

The Benefits of Homestead Protection

Homestead protection secures the value of certain amounts of equity in your home. When you meet the requirements, that value cannot be attached, seized, or otherwise taken by many creditors for payment of debts.

The protection does not apply to tax debt, child or spousal support obligations, fraud judgments, or liens on the home that were recorded before the creation of the homestead. While it provides protection against claims by unsecured creditors, it does not shield a homeowner from a claim by a bank or other creditor that holds a mortgage on the property.

What You Need to Do to Claim Homestead Protection

Massachusetts law provides an automatic homestead protection of $125,000. But if you take the right steps to declare and register your homestead, you can protect significantly more of your equity.

Filing a legal document known as a Declaration of Homestead with the Registry of Deeds in the county where the property is located will provide up to $500,000 in protection. Joint owners may share the protection amount, but if there are more than two owners, they may apply for an extra $250,000 in protection.

When joint owners are over the age of 62 or disabled, they may each claim up to $500,000 in homestead protection for a total of $1,000,000 protected from creditors.

It is important to use the correct form and to include all the required information, including the certificate of title number or book and page number of the deed or title. Each owner must sign the document in the presence of a notary. If a home is owned by one spouse, only that spouse needs to sign, but they still need to declare the spouse. You will need to know whether your property is recorded land or registered land because that affects evidence of title.

An attorney can assist with the process to ensure that you receive the maximum protection allowed by law for your specific circumstances. The process can be particularly complicated when there is more than one owner.

How Homestead Protection Applies in Different Situations

If you sell your home, the Homestead Act still protects your proceeds from the sale for up to a year, or until you use the funds to purchase a new home. When you buy a home that is intended to serve as your primary residence, the attorney at closing is supposed to provide you with a notice of your right to declare a homestead. It makes sense to make your declaration as soon as possible for maximum protection.

When the person who declared the homestead passes away, the children of the person who filed continue to enjoy the homestead protection. If you get divorced and one spouse continues to live in the home, that spouse will still have homestead protection even if they remarry. However when a house is sold to someone outside the family, the homestead can be terminated. It will also be terminated if the person who made the homestead declaration later files a homestead declaration on a different property. You can only have one homestead at a time.

Jordan & White, LLC Can Help Protect Your Home with a Homestead Declaration

Many people do not realize that they can gain significant protection from creditors by filing a homestead declaration. Others know they should do it, but the task falls to the bottom of the priority list. This can be a serious mistake.

At Jordan & White, LLC, we focus our practice on estate planning and real estate, so we have seen the benefits the homestead declaration can provide for families on numerous occasions. To protect your investment, we invite you to talk to us about how we can help you secure your homestead declaration.