This month, Governor Charlie Baker signed into law An Act to Clarify Homestead Estates which provides important updates to the Massachusetts Homestead Act, which was last substantially updated in 2010. In general, a Massachusetts homeowner who resides in the home as their principal residence may exempt up to $500,000 in equity from judgment and execution by recording a “Declaration of Homestead” in the registry of deeds for the county in which the property is located. Additionally, the Homestead Act provides for an automatic homestead exemption of $125,000 for any homeowner, without the need for recording. Since its enactment, the 2010 Homestead Act has been subject of a great deal of litigation with courts often struggling to apply its terms to various cases at hand. In many instances, courts have interpreted the Homestead Act to deny a homeowner right to an exemption, thwarting its underlying intent to protects people’s rights to remain in their homes. The recent amendments were intended to clarify certain provisions in order to further the legislative intent.
Among the changes to the Homestead Act are:
- Clarifying the allocation of the homestead exemption to trust beneficiaries and co-owners residing in the home as their principal residence. The changes now reflect the intended protection for owners residing in the property without reducing the value by allocating it among other beneficiaries that do not reside there.
- Adds “remainder interest in a life estate” and “lessee of a residential cooperative housing unit” as persons entitled to the benefits of a homestead, provided they reside there. This change was made in response to several Bankruptcy Court decisions deciding that such persons were not entitled to homestead benefits.
- Specifically excludes holders of future and contingent beneficial interests in a trust from the definition of trust beneficiary entitled to homestead protection.
- Eliminates judgments based on “mistake” as a statutory exception to the homestead protections.
- Recognizes that divorce and other court judgments can terminated possessory rights of one spouse, and that lawful possession is required to claim a home as a principal residence.
These amendments to the Homestead Act will further its underlying intent of protecting people’s homes from the reach of creditors and should give clarity to Court’s adjudicating disputes over homestead issues. Everyone who owns and resides in their home in Massachusetts should have a recorded Declaration of Homestead. Preparing and filing the form is easy and costs only $35 to protect up to $500,000 in equity from potential claims.