Homestead or not to Homestead?
What does a homestead protect you from? Everyone has heard the phrase “sued out of house and home.” A proper declaration of homestead protection actually prevents that from happening. A homestead protects against attachment, seizure, execution on judgment, levy or sale for the payment of debts to the extent of the applicable homestead amount per home, per family. That means that if you are sued and a judgment is issued against you, you cannot be required to sell your house to satisfy the judgment up to the homestead amount. If you ever have to file for bankruptcy, your home cannot be used to pay your unsecured creditors. A homestead will not, however, protect you from a mortgage foreclosure. The protection only applies to debts or judgments after you file a declaration of homestead. The best practice is to file a declaration of homestead immediately after a deed is filed when you purchase a home. There are also added protections for a person who is 62 years of age or older, or disabled.
Any person who is purchasing a house or property to be used as their principal residence is entitled to homestead protection. And as of March 16, 2011, a holder of beneficial interest is considered an owner and therefore entitled to a homestead as well, if that home is used as the principal residence of that beneficiary. An estate of homestead can only be declared on a property where the declarant resides or intends to reside. An owner of a mobile home is eligible to declare homestead protection.
A homestead is important because if no homestead is filed on a person’s principal residence, in Massachusetts there is an automatic homestead protection but only in the amount of $125,000.00. However, if a declaration of homestead is filed, that protection increases to $500,000.00. Homestead protection includes each owner of the property and their family members who occupy the home as their principal residence. Beginning in 2011 a spouse who does not own the property but lives there as their principal residence is entitled to homestead protection. For example, an unmarried person declares a homestead and later marries, the new spouse is also protected. A spouse who still uses the house as their principal residence will not lose their homestead protection through divorce or remarriage.
There are a number of situations that are exempt from homestead protection. That includes: (1) a forced sale for federal, state and local taxes and liens (2) a mortgage, (3) an execution from the Probate Court to enforce a judgment for spousal support or child support (4) a lien on the home filed before the filing of a homestead, and (5) Medicaid liens.
If you have any questions about homestead protection contact Melissa S. Treneer.