Are you thinking of purchasing a new home? Congratulations! It is an exciting time, one filled with dreams and decisions. Make sure to engage the assistance of a real estate law firm that understands the myriad of laws in the state where you are purchasing your home. One of the details your real estate lawyer will tell you is that you have a right to declare Homestead protection for your new home when such home is your principal residence. We curated a few facts about Homesteads you need to know.
A Homestead protects the equity in your home from creditors, with a few exceptions.
A homestead filing may protect the equity in your primary home against attachment, seizure, execution on judgment, levy, or sale for the payment of debts upwards of $500,000 in the Commonwealth of Massachusetts. While the act does protect your home against creditors for certain debts, it does not take the place of home insurance.
Homestead laws vary by state.
Make sure when you are researching about Homestead laws that you check the specific state laws where you are purchasing a home. Some state Homestead laws grant automatic protections. Other states require that homeowners sign and record the document at the Registry of Deeds where they are purchasing the home.
Massachusetts and New Hampshire have different laws and protection amounts.
If you are purchasing a primary residence in Massachusetts, you are automatically protected for up to $125,000 without the need for filing a formal declaration. However, when a Declaration of Homestead is filed in the county where your property is located, then your Homestead protection affords the homeowner protection up to $500,000.00.
New Hampshire law automatically gives homeowners a $120,000 homestead protection on a primary residence. New Hampshire homeowners do not have to file a document as there is no additional protection.
If you are over the age of 62 or legally disabled, a Massachusetts law passed in 2011 allows you to file a Homestead.
The primary property of individuals over 62 or of a legally disabled person (regardless of age) is protected by a Homestead. Such protection expressly states that with a homestead declaration filing the “aggregate” protection increases to $1 million. The home must serve as the individual or individual’s principal residence.
One of the big benefits from the new revised Homestead law in Massachusetts is that a property held in Trust may take advantage of filing for Homestead protection without having to remove the property from Trust.
The holder of a trust is eligible for Homestead protection. If your new home is owned in a trust, only the trustee can execute a declaration of Homestead on behalf of the trust’s beneficiaries. Be sure to advise your real estate lawyer that the home is held in a trust so you can be advised appropriately.
There are a few things that are not protected by a Homestead.
Homestead protection is not all exclusive. The Secretary of the State of Commonwealth notes the following items are exempt from the Homestead protection:
- a sale for federal, state, and local taxes, assessments, claims, and liens
- a mortgage on the home
- an execution issued from the Probate Court to enforce its judgment that a spouse pays for the support of a spouse, former spouse, or minor children.
- where buildings on land not owned by the owner of a homestead estate are attached, levied upon, or sold for the ground rent of the lot where they stand;
- upon an execution issued from a court of competent jurisdiction to enforce its judgment based upon fraud, mistake, duress, undue influence, or lack of capacity;
- a lien on the home-recorded before the creation of the homestead.
You cannot declare Homesteads on ”non-principal residences.”
For example, a second home, vacation home, or investment property would not qualify for such protection.
If you would like to learn more about the Homestead Protection Act for your specific home, contact Liberty Law.