Homesteads: The New Law

1. Homesteads: The New Law Stewart Title Guaranty Company April 15, 2011

2. Types of properties on which homesteads can be declared (“home”) • one-to-four family dwelling and appurtenant buildings • residential condominium unit (G.L.c. 183A) • residential cooperative unit (G.L.c. 156B, 157B, 180) • manufactured home (G.L.c. 140, §32Q) • sale proceeds of a homesteaded property for a period of up to one year • insurance proceeds for a period of up to two years

3. Persons (“owners”) who can hold a homestead: any natural person who is: • sole owner • joint tenant • tenant by the entirety • tenant in common • life estate holder • holder of a beneficial interest in a trust

4. Three types of homesteads • “declared” — elderly or disabled person’s (§2) • “declared” — regular (§3) • “automatic” (§4)

5. Three types of homesteads • A declared homestead will supersede an automatic one but will relate back to the time of the acquisition of the automatic homestead • If a declared homestead is invalidated (e.g., not executed properly) homestead will revert to automatic type • Declaration of homestead under new statute will relate back to time of prior declared homestead on same property if the new homestead benefits family member identified on prior declaration or his/her spouse • Person is entitled to only the benefit of one type of homestead at a time

6. What’s protected? • Other than the reference to “ownership interest” in connection with a §2 homestead, it is the homestead (possessory) estate that is protected. • $125,000 for automatic homestead • $500,000 for declared homesteads • Allocation of protection

7. “Declared” — elderly or disabled person’s homestead (§2), prerequisites • Elderly: Person must be age 62 or over • Disabled: Person who meets the disability requirements under 42 USC 1382c, §§3(A) and 3(c) • Homestead is for the protection of the declarant(s) only, not other family members • Must be on a “home” occupied or intended to be occupied as a principal residence • A homestead under §2 will not terminate existing homestead rights of spouse or minor children (defined as a person under 21) more >>

8. “Declared” — elderly or disabled person’s homestead (§2), prerequisites << continued from last panel • Section 2 in one paragraph speaks in terms of protection of the “estate of homestead” but in a separate paragraph mentions protection of the “ownership interest” of the person • A §2 homestead is specifically authorized to be “recorded individually or jointly with another” • (If a §2 is declared other titled spouse can be excluded from homesteads right if §2 declarant will not sign §3 declaration) • Declaration requirements: Owner to be benefited by homestead must occupy or intend to occupy a “home” as principal residence

9. “Declared” — regular (§3), prerequisites • Homestead is for protection of declarant and his/her family members • Must be on a “home” occupied or intended to be occupied as a principal residence • Declaration Requirements: Owner and family members to be benefited by homestead must occupy or intend to occupy a “home” as principal residence

10. Requirements for declarations All declarations must meet these requirements (and cannot be contained in a deed): • Must be recorded (for manufactured home on registered land, can be recorded in registry of deeds) • Must be under penalty of perjury • Each owner to be benefited must sign, except in case of trust only trustee signs. (Statute says if both spouses are in title and the home is the principal residence of both, both spouses must sign a §3 homestead.) more >>

11. Requirements for declarations << continued from last panel • Each owner to be benefited and owner’s non-titled spouse must be identified • Must state that each person named therein occupies or intends to occupy home as principal residence

12. Additional requirements for declared homestead for elderly or disabled person • Statement that person to be benefited is elderly or disabled person and in case of the latter must have attached disability award letter issued by United States Social Security Administration or letter signed by registered physician that person is disabled under USC provision

13. “Automatic” (§4) • Homestead is for protection of owner(s) and his/her family members • Must be on a “home” occupied or intended to be occupied as a principal residence

14. Termination or continuation of homesteads • “Declared” — elderly or disabled person’s homestead (§2) (spouse does not participate) terminated (in case of sale)— • Sale or transfer of ownership interest except where elderly or disabled person is the transferee of all or a portion of the transferred interest • Recorded release of homestead • Subsequent declaration on other property • Abandonment more >>

15. Termination or continuation of homesteads << continued from last panel • In case of trust, deed or release by trustee(s) • Death of the person except that if the person is survived by (or during lifetime conveys to) a spouse who does not have the benefit of a declared homestead the homestead will continue for the spouse as a §3 homestead until he/she declares under §2

16. Termination or continuation of homesteads “Declared” — regular (spouse or former spouse participates) terminated (in case of sale)— • Deed to non-family member signed by owner and owner’s non-titled spouse or former spouse residing in the home as a principal residence but deeds between spouses, former spouses or cotenants or life tenant and remaindermen will not terminate homestead unless there is an express release (would apply to a buy-out) • Release by owner and owner’s non-titled spouse or former spouse residing in the home as a principal residence more >>

17. Termination or continuation of homesteads << continued from last panel • Abandonment, but only as to those who have abandoned (e.g., declarant only leaves family) • In case of trust, deed or release by trustee(s), or such action by an identified beneficiary, but deeds between trustee and beneficiary will not terminate homestead unless there is an express release • Declaration of a new homestead on other property (but this will not affect rights of the spouse or minor children unless they reside in the other property as their principal residence). more >>

18. Termination or continuation of homesteads << continued from last panel • If declarant subsequently marries a §3 homestead will benefit the spouse • A §3 homestead (and also an automatic homestead) existing at the death or divorce of a person holding such homestead shall continue for the spouse, former spouse and minor children and the remarriage of the spouse will not affect the continuance of the homestead

19. “Automatic” (spouse or former spouse participates) terminated (in case of sale) • Same as “Declared” regular

20. Subordination of homesteads (mortgages) Applies to all mortgages (non-spouse does not participate) • Signature by owner only • Non-titled spouse is not required to sign • No statement of subordination required • Lender shall not require or record a release of homestead in connection with mortgage

21. Statements of marital status and affidavits • The “marital status” of the grantor or releaser recited in a deed or release “may be relied upon by a good faith purchaser for value” “We, John and Mary, husband and wife (or married to each other) . . . “ Fine in a deed, but if in a mortgage and the spouse is non-titled, could this be considered a release (that is prohibited)? >> more

22. Statements of marital status and affidavits << continued from last panel • A statement that the grantor is “unmarried” is not sufficient because a former spouse may have homestead rights • As to acts undertaken in good faith reliance on such deed or release, an affidavit by the grantor under penalty of perjury stating that the affiant had “no spouse then entitled to claim the benefit of an existing estate of homestead” shall be conclusive proof of the nonexistence of such benefit at that time

23. Notification in mortgage transactions • In all mortgage transactions, the closing attorney or settlement agent must provide the mortgagor with notice of the right to declare homestead protection and a summary of the differences between the automatic homestead protection and the enhanced benefits acquired by making a declaration of homestead. • Receipt of the notice must be acknowledged by the mortgagor in writing.

24. Existing homesteads • Existing homesteads shall continue in full force notwithstanding (1) repeal of any law or (2) failure to comply with the execution requirements of G.L.c. 188, §5, but shall be governed by the new law.