Moschella & Winston, LLP Your Legal Advisor for Life

By Michelle Mulvena

Your home is your biggest asset, but is it protected from creditors? Given the current economic climate, more and more homeowners find themselves at risk of losing their homes to satisfy such outstanding debts as credit cards and car loans.  What many people do not know however, is that by recording a proper Declaration of Homestead, the risk can be avoided.

What is a homestead?

This is a document filed at your local registry of deeds.  It protects up to $500,000.00 of equity in your home from creditors by preventing them from attaching a lien against your property or forcing a sale to cover outstanding debts.

Do you qualify?

As of March 16, 2011 the new Massachusetts Homestead Actprovides all Massachusetts homeowners with automatic protection up to $125,000.00 without even filing a Declaration of Homestead, so long as they occupy the property as their primary residence.  However, that is often not enough.  To qualify for the maximum protection of $500,000.00, homeowners must record the Declaration of Homestead with their local registry of deeds. If your home is held in trust, or you reside in a mobile home, you should consider filing a Declaration of Homestead, as they too are now eligible for the maximum protection.

What if your home is jointly owned?

Previously, only one homeowner was allowed to file for homestead protection.  Recent changes however now allow for all owners to benefit, so long as the proper declaration is filed.  Additionally, proper filing will protect spouses and minor children in the event the homestead holder dies.  If you intend to sell your home somewhere down the line, filing a homestead is critical.  It will shelter up to $500,000.00 of the proceeds from the sale for up to one year or until you purchase another primary residence, whichever is sooner.

Massachusetts Homestead Law Tips

A few important things to note:

• The homestead protection does not apply to certain types of creditors such as:
• Your mortgage company
• Liens recorded prior to the homestead
• Child or spousal support
• Federal, state or local liens, including Medicaid liens
• If you have refinanced in the past several years, you should consider filing a new homestead declaration.  Many refinancing mortgage agreements contain a waiver of homestead rights, so you want to ensure that you take advantage of the full protection.
• All existing homesteads recorded prior to March 16, 2011 will remain valid.  However, it is important to review the documents in light of these recent changes to ensure that your property is properly and fully protected.

Michelle Mulvena is an attorney at Moschella & Winston, LLP, a law firm specializing in legal planning and protection for individuals and families for over 30 years. She is also host of the Somerville Cable TV show, “Legally Speaking with Michelle Mulvena.” Please contact her at mm@moschellawinston.com or (617) 776-3300.

The March/April episode of Legally Speaking with Michelle Mulvena. This episode discusses the new Massachusetts homestead protection law, and the current housing market climate and the impact on estate planning.

See this related article by Michelle: Protect Your Home with a Homestead Declaration.

While the term “homestead” may conjure up images of a settler’s cabin in the Wild West, a homestead is actually a useful way of protecting your most valuable asset – your home – from creditors. A homestead declaration protects the equity in your home from claims of creditors up to $500,000. By filing the appropriate papers to “declare” your home as your homestead, you may be able to retain ownership in the event of a future financial catastrophe.

There are two types of homesteads under Massachusetts law. One establishes general protection for all individuals, while the second type establishes additional protection for elderly and disabled individuals.

The purpose of the homestead is to protect the home of a debtor, debtor’s spouse or debtor’s minor children, from some creditors and their claims. The homestead does not protect against mortgage defaults and government liens including a Medicaid lien. To secure this protection, the homeowner must file a Declaration of Homestead with the Registry of Deeds where the deed to the property is recorded. (One exception: If the property cited in the homestead is a mobile home, then the homestead needs to be filed with the town clerk’s office of the town the home is located in.)

You may file a homestead as long as your home is your primary residence and you own an interest in the home. A homestead may only be filed on a primary residence where you actually live – no vacation homes or rental properties. However, there is no set limit regarding the size or value of the property. Homestead forms may be obtained at most Registries of Deeds.

The homestead law offers additional protection for those over the age of sixty-two or disabled individuals, but declaring a homestead for your home is not a remedy for all situations. The issues and laws surrounding homesteads can be very confusing. If you want to ensure your interests are properly protected, consult with an attorney who specializes in this area of law. A homestead is one of the greatest financial protections available, and it is well worth obtaining professional advice to ensure that it is done correctly.

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Moschella & Winston has specialized in legal planning and protection for individuals and families for over 30 years, and our attorneys are experts in elder, disability and special needs law.   Please contact us at info@moschellawinston.com or (617) 776-3300.