Effective today, Chapter 395 of the Acts of 2010 amends the current Massachusetts homestead law. The new law creates an automatic $125,000 protection on all homes that do not have a homestead declaration filed at the Registry of Deeds. The law still provides a $500,000 homestead protection for all homeowners who file a declaration at the Registry of Deeds. If you filed a homestead declaration prior to March 16, 2011, your $500,000 protection will continue to apply. Thus, there is no need to re-file your homestead declaration due to these statutory changes. The Secretary of State provides an informative overview of the new homestead reform legislation on their website. Highlights of the new law include the following:
- Automatic Homestead protection– all Massachusetts homeowners will receive an automatic homestead exemption of $125,000 for protection against certain creditor claims on their principal residence without taking any action;
- Trusts- a beneficial interest in trust is considered an “owner,” eligible for an estate of homestead. If your home is owned in trust, only the trustee shall execute a declaration of homestead on behalf of the trust’s beneficiaries. The trust declaration and or trustee certificates may also need to be recorded at the Registry of Deeds;
- Elderly and disabled-for those individuals over the age of 62 (elderly), or legally disabled, the new law expressly states that a homestead may be filed on each individual’s behalf and the aggregate protection increases to $1 million;
- Notice of homestead rights– if you are purchasing a new principal residence, the closing attorney must provide you with a notice of your right to declare a homestead protection. If you refuse to file a homestead, you will still be covered by the automatic $125,000 homestead provision under the new law;
- Married couples-both spouses will now have to sign the form. If you file a homestead as a single person, and subsequently get married, the homestead automatically protects your new spouse;
- Automatic transfer- upon death, homestead protection automatically passes to the surviving spouse and children who live in the home;
- Refinance– you do not have to re-file a homestead if you refinance. Under the new law, homesteads are automatically subordinate to mortgages, and lenders are specifically prohibited from having borrowers waive or release a homestead. Under the previous law, it was unclear as to whether a homeowner needed to file a homestead upon refinancing their primary residence;
- Pre-existing debts– homestead protections now extend to pre-existing debts and the proceeds of a sale or insurance coverage; and
- Multifamily homes– homesteads are now available on 2-4 family homes.
The new homestead provision states that all existing estates of homestead in effect on the effective date shall continue in full force and effect. Additionally, all existing estates of homestead shall now be governed by this new statute even though the execution of each does not comply with the new Massachusetts General Law.
What is the Massachusetts Homestead Act?
An estate of homestead is a type of protection for a person’s principal residence. There is an automatic homestead protection of one hundred twenty-five thousand dollars ($125,000) with respect to a home that does not declare a homestead exemption with the Registry of Deeds. This automatic protection may be sufficient to protect a deposit made upon the estate; however, it is not likely to be sufficient coverage to protect the full value of your home. In order for homeowners in Massachusetts to protect the value of their property up to five hundred thousand dollars ($500,000) per residence, per family, you must file a document called a “Declaration of Homestead”. The form is filed at the Registry of Deeds in the county or district where the property is located, referencing the title/deed to the property.
Who can file a Declaration of Homestead?
The owner or owners of a home who occupy or intend to occupy the home as a principal residence may file a homestead protection. A sole owner, joint tenant, tenant by the entirety, tenant in common, life estate holder, or holder of a beneficial interest in a trust may all be regarded as owners. With respect to a home owned by joint tenants or tenants by the entirety, the homestead exemption remains whole and unallocated between the owners. If there are more than two (2) joint tenant owners, there is ability to add an additional two hundred fifty thousand dollars ($250,000) to the exemption amount for additional joint tenants in certain cases. With respect to a home owned by multiple owners as either tenants in common or as trust beneficiaries, the homestead exemption shall be distributed among the owners in proportion to each of their ownership interests. Manufactured or mobile home owners are also eligible to declare homestead protection under the provisions of the new statute.
What is protected under the Declaration of Homestead?
Upon filing a declaration of homestead, the real property or manufactured home which serves as an individual’s principal residence shall be protected. A principal residence is considered to be the primary dwelling where an owner, and their family if applicable, reside or intend to reside. The declared estate of homestead shall protect against attachment, seizure, execution on judgment, levy or sale for the payment of debts to the extent of five hundred thousand dollars ($500,000) per residence, per family.
Do I need to re-file a Homestead if I refinance?
An estate of homestead shall be automatically subordinate to a mortgage on the home that is executed by all of the home’s owners. For homeowners that have previously executed a mortgage that included a waiver of the homestead protection, the new law applies to the existing homestead. This “waiver” shall be treated as a subordination and the previously recorded homestead shall be in full force and effect. As a result, there is no immediate need to file a new homestead declaration after you refinance, take out a second mortgage or a home equity loan. Although it is not necessary, it may be advisable in certain circumstances. Under the new law, you can file a new declaration without injury because the subsequent declaration shall relate back to the previous declaration. Where there are multiple owners, if a mortgage is executed by fewer than all of the owners it shall still be subject to the estate of homestead and shall be considered superior only to the homestead estate of those owners who are parties to the new mortgage, their spouses and minor children, if any. The homestead protections of those owners who were not parties to the new mortgage shall remain intact
How can the Homestead be terminated?
- Non-familial transfer– if the home is conveyed by deed to a non-family member and the deed is signed by the owner and, if applicable, a non-owner spouse or former spouse residing in the home as a principal residence at the time the deed is drafted;
- Recorded release– signed and acknowledged by the owner and, if applicable, a non-owner spouse or former spouse residing in the home at the time of the release;
- Abandonment of the home as a principal residence by the owner, owner’s spouse, former spouse or minor children, only as they apply to rights of the persons who abandoned the home. Military service shall not be considered abandonment;
- Termination of trust– if either the trustee or a beneficial owner identified in the homestead declaration records a termination on the property held in trust; and
- Multiple Declarations of Homestead– if a subsequent homestead declaration is made on another home, such as a vacation home, it shall automatically terminate a prior homestead on an actual principal residence. There are a number of transfers that do not terminate an already declared homestead. Any transfer of the property between spouses, former spouses, co-owners, a trustee and a beneficiary or a life tenant and a remainder-man will not terminate a previously declared homestead. Also, if a conveyance or release is made without the signature and acknowledgment of a non-owner spouse or former spouse who is residing in the home at the time the principal residence is conveyed or released by an owner, it shall not affect the homestead of the spouse who failed to sign.
Information Courtesy of Massachusetts Secretary of State
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