How
does the Homestead work?
By
filing a Declaration of Homestead, you
exclude up to $500,000 in the value of your
personal residence from creditors. You
still may incur debts and, if you have other
assets like bank accounts or a vacation
home, they can be seized to satisfy your
debts, but your home would be protected for
as long as you continued to live in it.
When
should I record a Homestead?
As
soon as possible. The Homestead only
protects you from debts that come into
existence after the Homestead has been
recorded. When you need the Homestead,
it's too late to record it. (Although
most attorneys advise clients to record a
Homestead even after a debt has come into
existence since it might provide some
protection).
What's
the downside of a Homestead?
There
isn't one. Having a Homestead does not
prevent you from selling or refinancing your
home. It does not harm your credit
report. It just protects your home.
Does
a Homestead replace insurance?
Absolutely
not. You should still carry adequate
insurance on your home, car and possessions.
The Homestead is in addition to insurance.
My
spouse and I both own our home; do we both
sign the Homestead form?
No,
the Homestead law specifies that only one
spouse may file a Homestead, but that
Homestead protects the family home against
creditors of either spouse. If you or
your spouse are 62 or older, however, you
may both file a Homestead form.
My
brother and I jointly own our home; do we
both file Homesteads?
If
two or more people jointly own a home, every
joint owner who lives in the house should
file a separate Homestead.
May
I file a Homestead on my vacation home?
The
Homestead only applies to your primary
residence.
Will
a Homestead protect me from nursing home
costs?
Not
really. Technically, if you go into a
nursing home as a private pay resident and
accumulate substantial charges that you
cannot pay, the nursing home would be your
creditor and could sue you for the amount
owed. In this case, the Homestead
would work. But the great majority of
people in nursing homes have their bills
paid by Medicaid (i.e., the Commonwealth of
Massachusetts). The value of Medicaid
benefits you receive are not covered by the
Homestead.
I
signed a deed transferring an interest in my
home to my daughter; do I need a new
Homestead?
Yes.
If you already have a Homestead and then
sign a deed transferring an interest in your
home to someone else - even if you keep an
ownership interest in the home and still
live there - you must record a new Homestead
to be protected. Signing a new deed
automatically dissolves an existing
Homestead.
I
just refinanced; do I need a new Homestead?
This
question comes up all the time and there is
no clear answer. Technically, a
mortgage is a deed, so according to the
prior answer, a newly recorded mortgage
would dissolve the existing Homestead.
Most lawyers and judges we have spoken with,
however, feel that a mortgage is not a deed
despite the technicalities of the law.
Under this reasoning, you would not need to
record a new homestead after recording a new
mortgage. We must emphasize, however,
that this is remains an unanswered question.
Also, the debt created by the new mortgage
is not covered by the Homestead.
Is
it a good idea to file a new homestead, just
to be safe?
Many
people (including quite a few lawyers) feel
this way. The only problem with this
approach is that the Homestead protects
against debts that arise after the Homestead
is recorded. If you recorded a
Homestead in 2000 and incurred a debt in
2002, the Homestead works. But if you
record a new Homestead in 2005, that 2002
debt predates your Homestead which no longer
protects your home from that debt. A
new Homestead dissolves an older one, and
there is no continuation of coverage.
I
have more questions.
You
can use the above link to chapter 188 to
read the Homestead law, but don't hesitate
to send
your questions to us by email.
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