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New Homestead Law in Massachusetts

The House and Senate have both passed a revised Homestead bill for Massachusetts and it is expected that the Governor will sign the bill and it should become law around April of 2011.

The revised Homestead law seeks to eliminate several issues and questions regarding the older version. The newest addition to the law is an automatic homestead of $125,000 for everyone without the need to take any action. This matches the Homestead exemption under Federal Bankruptcy law and gives a minimum protection to everyone without the need to see a lawyer or fill out a form and file it at the Registry of Deeds.

However, there still is the $500,000 exemption that you must claim by filling out a Declaration of Homestead and filing it with the Registry of Deeds. Everyone should really do this, so if you haven’t done so already, get it done! You can use an attorney, or do it yourself. Forms are available on the Registry of Deeds website and in many other places. (see http://www.lowelldeeds.com/)

Some of the clarifications in the new law are that a Trust can file a Homestead Declaration and it protects the beneficiaries of the Trust (who use the house as a principal residence), and the recording of a mortgage or a re-finance does not invalidate a previously filed Declaration. A homestead is subordinate (in second place) to a valid mortgage, but it protects the home from other creditors.

Also made clear is that the proceeds of the sale of a homestead property are protected until they are invested in a new homestead property or for one year (whichever comes first. )

The Homestead protection means that creditors cannot seize your home to pay your debts (and make you homeless). It’s a great idea and protects the sanctity of the home for spouses and minor children, especially in hard times. Of course, it is second to your mortgage and some valid government debts, so it isn’t an absolute protection, but it’s worthwhile filing the Declaration.

All older homesteads are “grandfathered” in under the new law and don’t need to be re-filed. Also, in the future, instead of just one person filing the homestead, all co-owners must sign the declaration.

For the text of the law see: Bill Text – S2406