Create a Homestead
A person’s home is his or her castle, subject of course to real estate taxes, assessments, mortgages, and creditors threatening to attach the home to satisfy a money judgment. Filing a simple form with the Registry of Deeds won’t help protect your home against the tax collector or your mortgage lender, but it can help shield your home from the claims of creditors for debts you incur after the purchase of your home.
The form is called a Declaration of Homestead and, for people under the age of 62, it currently exempts the first $500,000 of the equity in your home from your creditors. For the elderly (over the age of 62) and disabled, the protection is also $500,000 per person for each owner. Massachusetts provides automatic homestead protection when one purchases a home, but that protection is capped at $125,000. It is necessary for a homeowner to execute a Declaration of Homestead and record it at the appropriate Registry of Deeds for it to become effective, and to increase your protection.
It is up to the homeowner to take action and record the Declaration form. If one is elderly or disabled, a slightly different form must be used. The homestead protection is available only for one’s principal residence and, except for the elderly and disabled homestead, only one owner may acquire a homestead for the benefit of his or her family. Therefore, in those situations where neither homeowner is elderly nor disabled, the Declaration of Homestead should not be signed by both husband and wife.
A separate elderly or disabled homestead may be filed by any person who qualifies. Therefore, if both husband and wife are over the age of 62, they may each file an elderly Declaration of Homestead. A “disabled person” under the statute is defined as “an individual who has any medically determinable permanent physical or mental impairment which would meet the disability requirements for supplemental security income…” The filing of such a homestead must be accompanied by an original or certified copy of a disability award letter issued by the Social Security Administration, or a letter signed by a licensed physician certifying that the person filing the Homestead Declaration meets those disability requirements.
In addition to protecting the home against creditors in a state court action, the Homestead Declaration may increase the exemption if one of the homeowners files for protection under the U.S. Bankruptcy Code. The exemption under the Bankruptcy Code of less than $20,000 can be increased to $125,000 or, if the residence has been owned for more than 3.3 years prior to filing for bankruptcy protection, the homeowner may be able to claim the full $500,000 of protection. Obviously, having a homestead in place could be of significant benefit to a homeowner who must file for bankruptcy protection.
Every homeowner should take advantage of the Homestead Statutes. Our law firm will prepare and record a Homestead Declaration for a nominal fee. All you have to do is provide us with a copy of your deed and we will prepare it and record it at the Registry of Deeds. If you want to go directly to the Registry of Deeds, forms are available for you to fill out and record on the spot. The recording fee is currently $35.00.
Take a moment and have your Declaration of Homestead prepared. Until Massachusetts passes a law to give homeowners automatic protection, the burden is on you to protect your home.