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Questions and Answers about Declarations of Homestead in Massachusetts

April 20, 2010

Over the last few years in my law practice, I’ve found that there is a lot of interest in Declarations of Homestead.  It seems that much of that interest has been generated by salespersons who were giving people basic information, perhaps as a way to get in the door to attempt to sell financial products.  Sometimes that information may not have been quite accurate, so here are brief answers to some common questions I’ve been asked about Declarations of Homestead in Massachusetts:

What is a Declaration of Homestead?

A “Declaration of Homestead” is a simple and inexpensive Massachusetts legal document that can protect part (or perhaps all) of the value of your home from most of your future creditors and lawsuits against you. Unless you own a mobile home, it must be recorded in your county at the Registry of Deeds or the Registry District of the Land Court. If you own a mobile home, it must be filed at your Town Hall or City Hall.

Why should I have a Declaration of Homestead?

If you do not have a Declaration of Homestead in place, and are sued and lose, there is a chance that you could lose your home if your insurance does not fully cover the lawsuit. If you have a Declaration of Homestead in place, and are sued and lose, your home may instead be totally protected during your lifetime (and, depending on the type of homestead, your spouse and minor children may also receive protection).

Other than in foreclosure actions for failure to make mortgage payments, cases where a person gets sued and loses his or her home are rare. Unfortunately, until your case is tried and settled, you may not be sure that your home is safe. You cannot know until that time whether the verdict would be in excess of the amount which would be paid by your applicable insurance (i.e., homeowners insurance for an accident at your home, or automobile insurance for a motor vehicle accident).

Even if you are represented by a good lawyer who assures you that you have nothing to be worried about, you would probably be nervous if you were sued, and for at least a short time you would probably fear the worst. Knowing that you have taken action to protect your home would undoubtedly lessen your fears, so, if you are eligible, why not file a Declaration of Homestead? Just about anyone who owns a home is eligible for one of the three types that exist.

What is a regular Declaration of Homestead?

A regular Declaration of Homestead can be made by almost anyone. Until November 1, 2000, it protected the first $100,000.00 of the home’s value for you and your family; from November 2, 2000 through October 25, 2004, it protected $300,000.00. From October 26, 2004 on, it has protected $500,000.00. It gives your surviving spouse protection until his or her death or remarriage, whichever occurs earlier. It also gives each child of yours protection until he or she reaches the age of 18 years or becomes married, whichever occurs earlier.

Can a regular Declaration of Homestead ever pose any problems?

You can release a regular Declaration of Homestead at anytime and eliminate the rights that it gives to your spouse and minor children. You therefore should not have any problems if you later want to sell or mortgage the home.

If you die and an unmarried child of yours who is under the age of 18 years continues to live in the home, however, a regular Declaration of Homestead could cause your surviving spouse to have problems in selling or mortgaging the home. These problems occur because the spouse’s rights will be in conflict with the child’s rights. Thus, a married person who has young children should not make a regular Declaration of Homestead without consulting an attorney who is experienced in this area of law.

What is an Elderly or Disabled Declaration of Homestead?

Until November 1, 2000, an Elderly Declaration of Homestead protected the first $200,000.00 of the home’s value; from November 2, 2000 through October 25, 2004, it protected $300,000.00. From October 26, 2004 on, it has protected $500,000.00. Only a person who is at least 62 years of age can file it.

Until November 1, 2000, a Disabled Declaration of Homestead protected the first $200,000.00 of the home’s value; from November 2, 2000 through October 25, 2004, it protected $300,000.00. From October 26, 2004 on, it has protected $500,000.00. Only a person who has a current physical or mental impairment which is considered a disability by the Social Security Administration can file a Disabled Declaration of Homestead. While the other types of Declarations can be very simple to prepare, the disabled type is more complicated because it is not valid unless you produce and record or file written proof of the current disability.

Are Elderly or Disabled Declarations of Homestead fairly new?

The elderly and disabled types have only been available since 1987. If you recorded or filed a Declaration of Homestead prior to 1987 and wish to take advantage of the additional protection that an elderly or disabled type can give you, you can record or file a new one.

Must I record or file a new Declaration of Homestead to increase my protection to the new amount?

No, the law has automatically increased each type of Declaration of Homestead to $500,000.00 of protection, although not against a creditor whose enforceable rights existed before the change in the law.

Can more than one person make a Declaration of Homestead?

Generally, only one owner of the home can make a regular Declaration of Homestead if the home is owned as joint tenants or as tenants by the entirety. More than one person can make an Elderly or Disabled Declaration of Homestead, and increase their protection.

What does a Declaration of Homestead not cover?

No type of Declaration of Homestead protects any of the home’s values against a pre-existing debt or mortgage, but it can protect you against some lawsuits. Further, no type of Declaration of Homestead protects any of the home’s value against the possible impact of nursing home costs, so upon an application for MassHealth, the home could still remain exposed and at risk.  (The only way to protect your home in case you have to go into a nursing home is to make some sort of legal transfer of the home. To protect the home fully under current law, such a transfer usually has to be made 60 months before you have to enter a nursing home; there are exceptions where the home can be immediately safe for certain children, siblings and disabled persons.)

My home is in a revocable trust, so isn’t it already safe from creditors?

No, a home that is in a revocable trust may or may not have protection against the creditors of the person who established the trust. Case law has gone in both directions as to whether a person whose home is in a revocable trust can file a Declaration of Homestead. Because of the uncertainty of whether a home in a trust is entitled to a homestead exemption, deeding your home into a revocable “living” trust is just about the worst move you can make if protection from creditors (including nursing homes) is a primary concern. Unfortunately, revocable “living” trusts may often be pushed on people (such as at free trust seminars) without full explanation of this legal issue.

What happens if I am sued and my home is worth more than the amount protected by my Declaration of Homestead?

If your home is worth more than the amount which is protected by our Declaration of Homestead, anyone who sues you may still be able to force a sale of your home (assuming that your homeowners or automobile insurance does not fully cover the lawsuit). After the sale, however, you would be able to walk away with the protected amount.

Should everybody file a Declaration of Homestead?

As our society seems to be becoming more litigious all the time, protecting your home against future lawsuits may be of great psychological (if not financial) importance to you. Filing a Declaration of Homestead is not the only way to protect your home, nor is it necessarily the best way, but it at least affords a good deal of protection and peace of mind. I don’t believe there is ever a one-size-fits-all answer to any estate planning question, but anyone who has not yet made one of the three types of Declarations of Homestead described above should strongly consider doing so.

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