Putting the home in Homestead

As many of you probably know, I represent parties in transactions regarding residential properties. I love working with buyer and sellers, starting with Purchase and Sales, and through closing. I happily work with lenders and real estate agents to make sure that the deal not only happens, but that my client is properly protected.
As part of the closing process, I always offer to provide a Homestead for buyers. Most people do not know a lot about Declarations of Homestead, sometimes not even knowing if they have one on their current house; in order to help buyers better understand the benefits of having one, I always provide the information below.
It is never too late to file a Homestead, even if you have lived in your house for 20 years. If you are not sure if have one, I am happy to look it up for you.

Homestead protection is available for owner occupied, residential one to four family homes, condominium unit, operative apartments and for manufactured homes, which in each case serves as the homeowner’s principal residence. Co-owners of a home ‘share’ the exemption amount.

A homestead estate exempts a certain amount of the equity of a home from attachment, seizure, execution on judgment, levy, and sale for the unsecured debts of the owner of the home, except for the following:
• Federal, state, and local taxes, assessments, claims, and liens;
• Liens recorded prior to creation of the estate;
• Mortgages;
• Orders of the probate court for support;
• A levy or sale for ground rents (where the homeowner does not own the land); and
• An execution from a court to enforce a judgment based upon fraud, mistake, duress, undue influence or lack of capacity.

Under the Act, the homeowner’s equity in the home is protected for up to one year after the sale of the home, and, if the home has suffered a casualty that results in the payment of insurance proceeds, then the insurance proceeds are protected for up to two years, in order to allow the homeowner to acquire a homestead in a new (or reconstructed) home.

AUTOMATIC HOMESTEAD: All homeowners are entitled to automatic homestead protection of up to $125,000 of the equity in their homes. You do not need to do anything to benefit of this protection.

DECLARED HOMESTEAD: By making a written declaration of homestead, recorded in the Registry of Deeds, a homeowner’s homestead protection is increased to $500,000.

Some other benefits of declaring a homestead include:
a. A non-owner spouse who lives with the owner has the benefit of the homestead (until terminated in writing);
b. A declared homestead cannot be subordinated to an unsecured debt;
c. If an unmarried owner declares a homestead and marries thereafter, the declaration will automatically benefit the owner’s spouse upon marriage; similarly, a divorce and/or remarriage will not affect the homestead of the spouse who remains in the home as his/ her principal residence.
d. A trustee of property held in trust can declare homestead for the beneficiaries of the trust who occupy the home as their principal residence;
e. Elderly (age 62 or older) and disabled persons who declare homestead are each entitled to separate exemption of up to $500,000, which is personal and not shared with any other co-owners of the home.

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