Massachusetts homestead law

There’s a bill (House Bill No. 1584) currently pending this legislative session to update the Massachusetts Homestead Law which would provide additional financial protections to homeowners and consumers in Massachusetts.homestead-stamp

A Massachusetts homestead declaration is a simple and inexpensive tool enabling homeowners to protect up to $500,000 of equity in their principal residence from the majority of creditors. The mechanism is relatively simple. All that is required is the preparation and recording of a Declaration of Homestead with the applicable Registry of Deeds and the payment of a state mandated recording fee. The total cost is typically around $100 to prepare and record the instrument.

The Homestead Exemption provides protection and security to homeowners, eliminating the threat that the equity in their principal residence could be exposed to satisfy common unsecured debts or obligations.

Many feel that the Homestead Law (M.G.L. c. 188 §1, et seq.) is greatly in need of modernization. If ultimately passed, this homestead bill will have a significant impact in favor of Massachusetts consumers and  homeowners who run into financial difficulty.

Here’s a summary of the changes:

  • There will be automatic homestead protection, without the need for recording a declaration, of up to $125,000 in equity, which amount corresponds to some of the limitations on homestead exemptions enacted in 2005 in the Federal Bankruptcy Code as part of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”). Individuals and families with more equity in their homes will still have a significant incentive to record a standard declaration to protect up to $500,000 of their equity (the amount of the declared exemption under current law).
  • Beneficiaries of trusts are entitled to homestead protection
  • Mortgages cannot terminate previously filed homesteads – instead, any provision in a mortgage that purports to terminate a homestead is deemed merely to subordinate the homestead to such mortgage
  • Proceeds from the sale of a home, or insurance proceeds, are entitled to homestead protection (for up to a year for sale proceeds, and two years for insurance proceeds)
  • Transfers among family members will not terminate a previously declared homestead – even if the homestead isn’t reserved in the deed
  • Manufactured homes are eligible for protection under all provisions of the statute

We always highly recommend that our buyer clients record a homestead on their principal residence if they have not done so already. The new law will protect those who don’t (up to $125,000), but will provide even more incentive for those who do.

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