Homestead Act - Changes Take Effect in March 2011
Important amendments were made in December 2010 to the Homestead Act (Mass. General Laws, Ch. 188) and go into effect on March 16, 2011. The Homestead Act gives homeowners protection against subsequent attachment, suit, or bankruptcy to the extent of $500,000 of equity per residence, per family. This legal document, called a Declaration of Homestead, is filed at the registry of deeds, at time of purchase of a primary residence. It's important to note that while a Declaration of Homestead can protect the equity in many cases, tax obligations and child/spouse support obligations are not covered.
One of the most significant changes to the Homestead Act is that homeowners are now allowed to maintain the same Homestead protection on the proceeds of the sale. The protection is available for a period of one year from the time of the sale, or when a new primary residence is purchased, whichever happens first.
If you want to obtain the maximum coverage of $500,000, you need to file the Declaration at the registry of deeds. Otherwise, there will be an automatic coverage amount of $125,000 without filing.
Other changes to the Homestead Act include protection for homes held by a trust, that a new Declaration is unnecessary after refinancing, and it prohibits lenders from requiring a waiver or release of the Homestead. Lastly, four-family homes will qualify for Homestead protection and closing attorneys must inform buyers of their right to file a Declaration of Homestead.
If you filed a homestead declaration prior to March 16, 2011, your $500,000 protection will continue to apply.
If you are thinking of buying or selling a home, I encourage you to consult with an attorney regarding specific legal questions regarding the Homestead Act, as well as other issues that may arise during your real estate transaction.
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Catherine Condon, Broker MA & NH