You worked hard to earn your money. You socked cash away for the inevitable rainy day and your kids’ college tuitions. You hired the best accountant you could find to reduce your tax bill. You made smart investments. You preserved your credit rating through good times and bad. You refinanced your home, reducing your interest costs. You have insurance.
But one bad business transaction, one serious episode by your teenager, one awful car accident, or just simple rotten luck on the job or with your health or a family member’s health, and you could face debts and liabilities that spell hard times or even bankruptcy. Would you want to start over from virtually nothing?
Thanks to an upcoming change in Massachusetts law, however, you will soon be able to take another step to protect your household from ruin. Effective March 16, 2011, the new Massachusetts Homestead Law will make it easier and more certain to protect up to $500,000 of home equity in your principal residence from judgment creditors and creditors in a bankruptcy.
Here in a nutshell are the highlights of the new law:
- Automatic homestead protection of $125,000 (per couple in the case of those who own their principal residence as joint tenants or tenants by the entirety)
- $500,000 homestead protection (per couple in the case of those who own their principal residence as joint tenants or tenants by the entirety) for those who properly file a Declaration of Homestead at the Registry of Deeds
- Going forward, both individuals in a couple who own as joint tenants or tenants by the entirety must sign the Declaration
- Separate homestead protection of $500,000 per owner may be claimed by elderly owners who record separate Declarations with special elderly-person provisions, or a single elderly homestead of $750,000 may be claimed by a single Declaration if the owners are joint tenants or tenants by the entirety
- Homestead protection will now extend to the proceeds of a home sale (for up to a year or when a new primary residence is purchased, whichever is sooner), and proceeds of insurance following a fire or other casualty (for up to two years or the completion of reconstruction, whichever is sooner)
- A Homestead Declaration may now be filed even if the home is held in a Trust (the homestead protects the beneficiaries of the Trust in that case, with the protection pro-rated by beneficiary on the basis of beneficial interests)
- Mortgage lenders may no longer require a recorded homestead to be released or discharged in a refinancing; instead any such releases or discharges will be treated as a subordination of the homestead to the new mortgage (i.e., the homestead won’t protect you against mortgage debt – or your tax bill for that matter – but will remain in place, through refinancings, against all other creditors without having to file a new Declaration)
- Homesteads will now protect against pre-existing debt (again, except for secured debt and taxes)
- Spouses and co-owners who transfer property between and among themselves will continue to have the benefit of the homestead protection
- Homesteads may now be filed on two, three and four family homes (for example if your primary residence is a unit in such a structure)
- Homestead protection will continue for the benefit of a surviving spouse and children who live in the home
With litigation firmly established as the national sport and debt collectors hungrier than ever, it is well worth your time to protect your hard-earned assets. As always with new legislation there are wrinkles and complications and you should consult your personal attorney to make sure you take the right steps in your particular circumstances to best protect the equity in your principal residence for you and your family.
Greg Peterson is a real estate and environmental law partner with Tarlow, Breed, Hart & Rodgers, P.C. in Boston.
About Tarlow, Breed, Hart & Rodgers, P.C.
Formed in 1991, Tarlow, Breed, Hart & Rodgers, P.C. is committed to providing high quality, comprehensive legal services to its clients. Featuring a breadth and depth of experience and perspective usually found only at larger law firms, Tarlow, Breed, Hart & Rodgers. P.C. offers sophisticated legal counsel to entrepreneurs, businesses, individuals, families, and institutions.
Tarlow, Breed, Hart & Rodgers’ areas of expertise include corporate law, employment matters, mergers and acquisitions, litigation and dispute resolution, estate planning, taxation, real estate, bankruptcy, and municipal law.
The offices of Tarlow, Breed, Hart & Rodgers, P.C. are located at 101 Huntington Avenue, Prudential Center, in Boston, MA 02199. For additional information, or to arrange for a consultation, please call 1-617-218-2000, e-mail info@tbhr-law.com, or visit www.tbhr-law.com.
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