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Massachusetts Homestead Exemption Law Overhauled. Does Your Situation Require Another Look?

©  Attorney Douglas R.  Peterson
On December 16, 2010 Governor Patrick signed into law Chapter 395 of the Acts of 2010 (Senate Bill No. 2406) which totally overhauls the Massachusetts Homestead Law by rewriting Chapter 188 of the General Laws. The law went into effect ninety days after it was signed into law (March 16th) and as has been the case with such legislation in the past, automatically applies to existing declarations that have been filed.
This new law provides an automatic homestead exemption for homeowners of $125,000 even if they do not file a written declaration of homestead. But, the amount of the exemption can be increased to $500,000 by the filing of such a written declaration. The new law also makes it clear that a mortgage refinance does not disturb the homestead declaration and bars lenders from requiring a release of the homestead as part of the new mortgage transaction. Other provisions include protection of homes held in a trust. All owners of the automatic exemption must share one $125,000 exemption in proportion to their ownership or beneficial interest. For declared exemptions, those declaring elderly (62 or over) or disabled exemption under section 1A each get a $500,000 exemption, all others (under section 1B) must share one $500,000 in proportion to their ownership or beneficial interest. In the case of property owned by and elderly or disabled person and one or more others who declare, there is a maximum $750,000 exemption which is not allocated among owners and/or beneficiaries. The new law also makes it clear that the protection applies to proceeds of a sale up to one year after the sale (and thereafter if used to buy a new home and new declaration applies) and also to fire and casualty insurance proceeds up to two years (and thereafter if used to buy a new home and a new declaration applies).
Under the new law there are new requirements and formalities for a valid written homestead declaration and individuals seeking to file new written declarations of homestead after the new law goes into effect should not use forms in circulation (on the internet, or otherwise) unless they are positive that the forms comply with the new law. Under the new law, a homestead exemption can no longer be created by statement in the deed of acquisition of title. Also, if spouses are both owners, they both must now sign the declaration of homestead. These requirements do not affect the validity of preexisting homestead declarations.
This new law does not affect limitations on acquiring homestead protection within 1215 days of a bankruptcy proceeding under Federal Bankruptcy laws. ALSO NOTE:  The homestead exemption should not be confused with the medicaid regulation which disregards as an exempt asset the equity value of the personal residence up to a maximum, in Massachusetts, of $750,000.