New Increase Included In Recently Passed Affordable Homes Act
Flying under the radar in the recently passed Affordable Homes Act is that the amount of protection offered by a recorded Declaration of Homestead has increased from $500,000 to $1 Million. This is great news for homeowners. The increase to $1 Million applies retroactively to any valid Declaration of Homestead that is currently on record at the Registry of Deeds and to any future recorded Homesteads. This means homeowners who have a valid homestead on record do not need to file a new homestead to gain the benefit of the recent increase.
A Declaration of Homestead is a written instrument recorded at the registry of deeds by a homeowner which provides protection against certain creditor claims. Think of it as an umbrella insurance policy against a claimant or creditor coming after the equity in your house. For example, let’s say you get into a really bad car accident and don’t have enough insurance to cover the loss. A personal injury attorney could try to file an attachment against your primary residence for those damages to his client. A declaration of homestead would shield your property from those claims, now up to $1M.
As noted by Norfolk County Register of Deeds William P. O’Donnell: “If you own a home, and it is your primary residence, you have an automatic homestead exemption of $125,000. However, if you file a Declaration of Homestead at the Registry of Deeds, the exemption increases to $1,000,000. The Homestead Law provides a homeowner with limited protection against the forced sale of their primary residence to satisfy unsecured debt up to $1,000,000 if they have filed. This is especially important when you consider that for most of us, a home is our most valuable asset. Consumers should take steps to protect that asset.”
Another feature of the Homestead Law is the Elderly Homestead Declaration, for those who are 62 years of age or older and provides protection of $1,000,000 for each qualified person.
The Register further noted, “In March of 2011, the Homestead Law was updated so that a valid Homestead is not terminated when refinancing a mortgage. Other changes that took place back in 2011 state that a Homestead can provide protections for a primary home even if it is held in a trust. The definition of a primary residence was also expanded to include a manufactured or mobile home.”
A Declaration of Homestead also protects the sale proceeds if the home is sold for up to one year after the date of the sale or on the date when a new home is purchased with the proceeds, whichever comes first. Additionally, if the home is damaged by a fire, for example, the insurance proceeds are protected for two years after the date of the fire or on the date when the home is reconstructed or a new home is purchased, whichever is earlier.
While the Homestead Statute provides important protections for homeowners, it is important to note that certain debts are exempt from protection under the Homestead Act. These include federal, state, and local tax liens, as well as mortgages contracted for the purchase of a primary home and nursing home liens. Most other mortgages, debts, and encumbrances existing prior to the filing of the Declaration of Homestead, along with probate court executions for spousal and child support, are also not covered under the Homestead Protection Statute.
Declarations of Homestead can be recorded at the Registry of Deeds for a only a state-imposed fee of $36.00.
For more information concerning Massachusetts Homestead Declarations, visit the Mass.gov Homestead Law page or if you want to record a new Homestead Declaration contact me at [email protected].
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