On December 16, 2010 Governor Patrick signed into law “An Act Relative to the Estate of Homestead”, a comprehensive revision of the Massachusetts declaration of homestead law.

Under prior law, a declaration of homestead protected up to $500,000 of equity in your primary residence.  This protection was available only if the homeowner actually filed a declaration of homestead at the registry of deeds.  Prior law contained several confusing provisions that sometimes disadvantaged homeowners.

The new Homestead Legislation goes into effect on March 16th, 2011.  Under the new law every Massachusetts homeowner will automatically receive $125,000 of creditor protection for the equity in their home, regardless of whether a homestead declaration is filed.  Homeowners who file a declaration of homestead will continue to receive $500,000 of creditor protection.  Moreover, the new rules for filing a homestead declaration clear up some confusing and ambiguous provisions of the prior law.  The new law makes clear the following:

There are many benefits to owning your home in trust (i.e. avoidance of probate on your death or disability, avoidance of the Medicaid recovery lien in the event you require assistance for the payment of nursing home expenses, etc.).  Under prior law, it was unclear whether one could hold title to his or her principal residence and still be able to claim homestead protection for the house.  The new law makes it clear that a beneficiary of a trust can secure homestead protection.  Married couples with equity in their home in excess of $500,000 may still want to hold title to their principal residence as tenants by the entirety, so please contact us before transferring title of your home to a trust.

Under prior law, you had to be very careful when refinancing your home.  Many homeowners unwittingly revoked their homestead upon the refinancing.  The new law makes clear that a mortgage refinancing will not terminate a previously filed homestead.  Further, transfers between spouses and co-owners do not rescind a previously filed homestead.

Perhaps one of the more important questions that is resolved by the new law concerns the proceeds from the sale or taking of a home or the insurance proceeds paid to the homeowner from a covered loss.  Under prior law there was a question as to whether homestead protection extended to the proceeds from a sale or insurance claim.  The new law makes clear that homestead protection applies to the proceeds for a period of time following the sale, taking or casualty.  In the case of where the home is sold or taken, whether voluntarily or involuntarily, the proceeds received on account of any such sale shall be entitled to protection for a period ending on the date on which the person benefited by the homestead either acquires another home that the person intends to occupy as a principal residence or 1 year after the date on which the sale or taking occurred, whichever first occurs.  In the event of a fire or other casualty, the proceeds received on account of any such casualty shall be entitled to protection for a period ending on the date upon which the reconstruction or repair to the home is completed or the date on which the person benefited by the homestead acquires another home that he or she intends to occupy as a principal residence; or 2 years after the date of the fire or other casualty, whichever first occurs.

Every client should file a declaration of  homestead. 

If you have any questions or need any assistance please call us.

This update is designed for general information only. The information presented should not be construed to be formal legal advice nor the formation of a lawyer/client relationship. For further information please contact one of our attorneys. Information contained herein has been abridged from laws, court decisions and administrative rulings, and should not be construed as legal advice or legal opinions on specific facts.  The enclosed material is provided for education and information purposes by MacLean Holloway Doherty Ardiff & Morse, P.C. to clients and others who may be interested in the subject matter.