When clients come to us wanting to protect their primary home, one of the tools we use is the Declaration of Homestead. These are the common questions we are asked about the homestead declaration, and how it can help our clients achieve their goals.
What is a homestead?
A homestead refers to the Homestead Act, a specific law in Massachusetts (M.G.L c. 188) that is intended to help homeowners protect the equity value in their primary home from creditors’ claims. The Homestead Act provides for an automatic homestead protection of $125,000 with respect to your equity in your primary home without having to take any further action. Given the value of primary homes here in Massachusetts the automatic $125,000 is usually not enough to protect the full value of your equity in your primary home.
For example, if you have a motor vehicle accident with injuries and you are deemed responsible, your principal residence will automatically be protected up to $125,000 against recovery. (It is important for you to remember: a homestead declaration is not a substitute for appropriate home and/or vehicle insurance!)
If protection is automatic, how does a Homestead Declaration help me?
Taking the necessary steps to file a Homestead Declaration provides you with benefits beyond those that you get through the automatic protection by increasing the value of the protection of the equity value in your primary home against creditors’ claims.
To understand this protection, you first have to understand what equity in your primary home is. Suppose your house is worth $600,00 and you have a mortgage on the property for $250,000. The equity value in your home is $350,000. That $350,000 is subject to creditors’ claims against you. The automatic protection the Homestead Act provides will cover $125,000, leaving $225,000 of your equity vulnerable to creditors.
However, if you file a Homestead Declaration, you can increase that protection to $500,000, per primary residence, per family.
It is important to note if you and your spouse (or joint owner of the house) are each over the age of 62 or disabled, you can each file a homestead for a total protection of $1 million.
Does it protect me from all creditors?
No. There are certain creditors that the homestead declaration will not protect you from. These include failure to pay mortgage; judgements against you based on fraud, duress, undue influence or lack of capacity; failure to pay federal, state or local taxes; and failure to pay child or spousal support. The Homestead Declaration will also not protect your home’s equity value from a MassHealth (Medicaid in Massachusetts) lien.
How do I file a Homestead Declaration?
Your estate planning or elder law attorney can create the document for you as part of your estate plan. Once the document is signed and notarized, your attorney can file it at the Registry of Deeds in the county where the property is located. There is a nominal fee for filing a homestead declaration, and it is worth it to obtain this unique protection for the equity you hold in your primary property.
Founded by nurse attorney and with offices in Acton, Burlington, and Sudbury, Massachusetts, Generations Law Group helps families navigate the complex areas of estate planning, elder law, and probate to inform and protect loved ones of every generation.