Understanding Homestead protection: How it protects you

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By Linda T. Cammuso

If you own your own home and believe that it is protected because you have a Declaration of Homestead it is important that you and your loved ones fully understand the law. The Massachusetts Homestead law allows homeowners to protect up to $500,000.00 of value in their homes from creditors.  While the law offers significant protection, it can be a source of confusion and misunderstanding for homeowners and even legal professionals.  This confusion can lead to a loss of Homestead protection, and in some cases, can mislead homeowners who fail to protect against certain exposures not addressed by the Homestead laws.

As a homeowner, you should understand some basic but important aspects of the Homestead law.  First, unlike many other states, Homestead protection in Massachusetts is not automatic: homeowners must file a “Declaration of Homestead” at the registry of deeds in the county where the home is located.  Without this filing, the protection does not apply.  Additionally, in most cases only one Homestead can be recorded per household or family. A subsequent Declaration will invalidate an existing Declaration, which may leave your home exposed to any claims that arose during the time frame of the prior Declaration.  Finally, a Homestead can only be filed on the “principal residence”; the protection is not available for second or vacation homes.

Homestead protection applies to the claims of most creditors.  However, certain claims or debts are exempt from the Homestead law – that is to say, your home is not protected from such claims.  These include mortgages used to purchase the home, debts contracted prior to the filing of the Homestead, and Federal, state and local taxes, assessments, claims and liens.

The use of trusts can be a trap for the unwary when it comes to Homestead protection.  Although this is a “gray area” of the law, it is the prevailing opinion that Homestead protection is likely not available for homes that are owned by a trust.  There are many good reasons why a trust would be used to own a home, but the risk of losing this important creditor protection should always be carefully considered before transferring the home into a trust.

A common misconception among homeowners is that a Declaration of Homestead provides protection from nursing home/long-term care exposure.  In reality, the Homestead laws do not protect your home from exposure to nursing home costs.  Medicaid (or “MassHealth” as it is called in Massachusetts) can place a lien on the home despite a Homestead Declaration.  If you are a homeowner who is relying on your Homestead to protect your home from exposure to nursing homes, you should pursue other avenues of protection.

Older homeowners should also be aware that the law allows homeowners who are age 62 or older, or who are disabled (regardless of age), to each file a Declaration.  This allows multiple owners of the same home to each claim $500,000.00 of protection.   This special protection applies regardless of marital status.

Most people believe that a Homestead Declaration cannot be utilized once an accident occurs or a liability arises.  However, in most cases the Homestead protection may only be barred for claims that have actually been filed against the home.  If you have any doubts about how you are protected consult a qualified attorney soon.

Linda T. Cammuso, a founding partner at Estate Preservation Law Offices and an estate planning professional, has extensive experience in elder law and long-term care planning. Linda may be reached at www.estatepreservationlaw.com or by calling 508-751-5010.