Skilled Attorneys Providing Homestead Declaration Advice in Cape Cod
In Massachusetts, a Homestead Declaration is an official document written and signed by all owners of a home or property and recorded at the Registry of Deeds. It allows homeowners to protect their home equity from creditors up to a certain amount.
The state has an automatic protection of up to $125,000.00 on all principal residences without further action from the owners. However, if a homeowner files a Homestead Declaration, he or she is able to increase that number to $500,000.00. According to law M.G.L. c. 188., your home equity is protected against creditors if you own your home and use it as your main place of residence. Manufactured or mobile homes are also protected by this law.
A declaration of Homestead is a way to shield your home equity or cash value against unsecured creditors, and it does not protect your home against secured claims, such as a loan or your mortgage. It cannot stop a bank from foreclosing on your home, but it can protect you from creditors who may have a lien on your home and want to take your home equity as a repayment to the debts you owe them.
What Does a Homestead Declaration Do?
The first clear benefit of having a declared homestead is the increased protection, raising the number from $125,000 to $500,000. This protection extends to a spouse, children, or any family members living in the home. If an unmarried individual ends up getting married, the protection will also extend to the new spouse. You must have a Homestead declaration in order to gain the increased protection of $500,000.
The Homestead protection remains active even after one of the spouses dies, and it will cover the surviving spouse and family members for the time they remain in the home. A spouse does not have to have his or her name on the title of the home in order to be protected.
The home is also shielded to some extent in the event of a sale or damage. If the home is sold, the proceeds from the sale are protected up to one year or until a new home is purchased. A declared homestead also offers up to two years’ protection for insurance funds received due to a fire or damage to the home.
There are special protections for Elderly Homestead owned by individuals who are 62 years old or older. Elderly Homestead Declarations protect a qualifying individual’s home up to $500,000.00. If there are two qualifying individuals in the home, they each can declare an Elderly Homestead and receive an aggregate protection value of up to $1 million. This type of homestead expires upon the individual’s death and does not continue to cover the family after that, so it is important for other family members to understand their options in that regard.
What about Trust-Owned Properties? Are They Also Eligible?
Yes. Effective March 16, 2011, a holder of a beneficial interest in a trust is considered an owner.
According to the new Massachusetts legislature revision, all beneficiaries of a trust that owns real estate are authorized to declare a homestead. In the case of a home placed in a trust with multiple beneficiaries, the law says the exemption will be distributed among beneficiaries in proportion to their ownership interests.
If a home is owned by a trust, only the trustee is authorized to execute a declaration of homestead on behalf of all beneficiaries of the trust, and the declaration will need to be recorded at the Registry of Deeds. In the document, the trustee must identify each of the beneficiaries to the trust that occupies or intends to occupy the home as their principal residence. Spouses that occupy or intend to occupy the home must also be named in the declaration.
Where Can I Learn More And Get Help?
If a homestead declaration is right for you, there are several steps that must be accomplished. First, your revocable trust will need to be amended to allow the trustee to declare a homestead under the new law. If your home is in a nominee or real estate trust, it will be necessary to deed the property over to your revocable trust before you can file a homestead declaration for that property. Seeking the help of a professional is highly recommended in this case.
At Boyd & Boyd, we have been helping many generations of families with their estate planning needs and would be happy to assist yours. We can offer knowledgeable legal advice in all areas of Estate Planning, Asset Protection, Trusts, and Elder Law in the Southern Massachusetts area.
Call us at (508) 775-7800 and request a free initial estate planning consultation to learn more. We are here to help.