Published on: January 11, 2011
The Massachusetts Homestead Statute was first enacted in 1851, to exempt from the reach of creditors a limited amount of equity in one’s primary residence. Recently, the Homestead Statute has come under fire for being ambiguous and in need of reform to address the modern family and modern ownership structures.
Accordingly, on December 16, 2010, Governor Deval Patrick signed a comprehensive revision to the Massachusetts Homestead Statute proposed and advocated by the Real Estate Bar Association (hereinafter “REBA”), which law is to take effect on March 16, 2011.
Under the new legislation, every Massachusetts homeowner will automatically have $125,000.00 of creditor protection for the equity of their home, regardless of whether a Declaration of Homestead is filed. By filing a Declaration of Homestead, a homeowner may increase that protection to $500,000.00.
Further, under the new law, mortgages cannot terminate previously filed Homesteads. Rather, any mortgage provision which purports to terminate a Homestead is simply deemed to subordinate the mortgage to the Homestead. Additionally, proceeds from the sale of a home, or insurance proceeds recovered if your home is destroyed by casualty, are also now entitled to Homestead protection (for up to a year for sale proceeds, and two years for insurance proceeds). Moreover, under the previous version of the Homestead Statute, persons whom did not file under the provisions of the statute that protect the elderly or disabled learned that their manufactured homes did not qualify for Homestead protection. However, under the new law, manufactured homes are eligible for protection under all provisions of the statute. Further, under the previous version of the Statute, if you transferred your home to a trust for estate planning or other purposes, there was no Homestead protection. In response to this issue, the statute now provides that trust beneficiaries are entitled to Homestead protection. Additionally, under the prior statute, Homestead protection was lost when spouses holding property as tenants by the entirety transferred the property to one spouse individually and did not expressly reserve the Homestead in the deed. Thus, under the new act, transfers among family members will not terminate a previously declared homestead, even if the Homestead is not reserved in the deed.
While the Massachusetts Homestead law is an important consumer protection statute, it is not without limitation. To that end, the following are exempt from the Homestead Statute: 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, executions issued by the Probate Court to enforce judgments for spousal or child support, where buildings on land now owned by the homeowner are attached, levied upon or sold for the ground rent of the lot of land whereon they stand, executions issued by courts of competent jurisdiction to enforce judgments based upon fraud, mistake, duress, undue influence or lack of capacity, and liens filed against the property prior to the date of filing of the Declaration of Homestead or liens existing prior to the date of acquiring the property (in the case of the automatic Homestead provision). Further, consumers should be aware that Homestead protection is not a substitute for homeowners insurance or any other type of liability insurance, and homeowners should continue to maintain appropriate insurance coverage for their home. If you would like further information regarding this article, please contact Jennifer Barnett at email@example.com or 781-843-5000 (157).