Lowell Deeds

The latest on real estate recordings and new technology from the Middlesex North Registry of Deeds in Lowell

August 28, 2007

Homesteads and Trusts

by @ 8:05 am. Filed under Homestead

I look forward to the Saturday Lowell Sun for two reasons: former publisher Kendall Wallace’s column on local politics and Attorney James Haroutunian’s column on real estate. Last Saturday, Jim Haroutunian wrote about a recent bankruptcy court case that seemed to hold that property owned by a nominee trust could be eligible for protection from the Declaration of Homestead. This has been a contentious issue since the Land Court has been rather adamant in its position that a Homestead cannot be registered for property held in trust under any circumstances. I can’t argue with the Land Court’s reasoning: a homestead is designed to protect the residence of an individual but a trust is a separate legal entity so therefore a house owned by the trust is not technically an individual’s residence. Still, most believe that where homeowners (usually spouses) have placed a property in trust but continue to live in the home and treat it as their personal residence, they should be entitled to a homestead’s protection. On the recorded land side where we have much greater latitude regarding what is recorded, homesteads are placed on property held in trust. With the help of the folks in the Law Library here in the Superior Court (which is a great asset, readily available to the public), I obtained a copy of the relevant decision. It’s by the US Bankruptcy Appellate Panel of the 1st Circuit and is dated July 6, 2007. Unfortunately, the holding of the case is not as simple as it seems at first. The debtor, Edward Szwyd, was the beneficiary of a trust created by his parents. The main asset of the trust was the family home. When his parents died, Edward became the sole trustee of the trust as well as the sole beneficiary. He then filed the homestead. The Bankruptcy Court concluded that under Massachusetts law, the trust had ceased to exist the moment Edward became both the sole trustee and the sole beneficiary. My recollection of Wills and Trusts from law school is a bit fuzzy, but here’s how I think this works: The essence of a trust is divided ownership – the trustee owns legal title and the beneficiary owns the beneficial title. When there’s only one trustee and only one beneficiary and they are the same person, those two titles merge together and the trust ceases to exist. (If there are contingent beneficiaries, for instance A is trustee and A is beneficiary but upon A’s death B is the beneficiary, then there’s no merger because B is in the picture, too). By my reading of the Bankruptcy Court decision, the court held that title had merged prior to the homestead being recorded, so when the homestead was recorded the property was owned by Mr. Szwyd as an individual and his designation as trustee was just an alias. So that really doesn’t conclusively answer the question of whether property held in trust will be protected by a homestead. Hopefully some future case will.

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