Changes to Homestead Act Take Effect in March
3/2/2011
The “Declaration of Estate of Homestead,” a bill containing a series of important amendments to the Homestead Act (Mass. General Laws, Ch. 188), was signed into law in December 2010 and goes into effect on March 16, 2011.
Upon filing a Declaration of Homestead, a legal document filed at the registry of deeds upon sale of a primary residence, the residence is protected against subsequent attachment, suit, or bankruptcy to the extent of five hundred thousand dollars ($500,000) of equity per residence, per family. While a Homestead can protect the equity in many situations, such as debts relating to the purchase of the home (purchase money mortgages), tax obligations, and child/spousal support obligations are not covered.
A significant change to the Act now allows homeowners to sell their primary residence, yet maintain the same Homestead protection on the proceeds of the sale. This protection is available for one year from the time of the sale or when a new primary residence is purchased, whichever is sooner. This provision allows flexibility for a homeowner who, for example, needs to relocate for a new job or downsize from their current home or may allow a homeowner with debt-related issues to still purchase another home.
Additionally, when these changes become effective, there will be automatic coverage in the amount of $125,000 without any filing. Yet, in order to obtain the maximum coverage of $500,000, the homeowner must still take the time to file the Declaration at the registry. This automatic coverage will protect homeowners who may not have heard of the Homestead Act.
Other key points to the new law include a section that now allows, in certain situations, Homestead protection for homes held by a trust; that the homeowner does not need to record a new Declaration after refinancing and prohibits lenders from requiring a waiver or release of the Homestead; and finally, the law will permit Homestead protection for up to four-family homes and will require closing attorneys to inform buyers of their right to file the Declaration for Homestead Protection.
As with many issues, homeowners should consult their personal attorneys regarding specific legal questions about the Homestead Act and how they may or may not be impacted by the new changes.
by Bay State Realtor
