Using a Homestead Declaration to Protect Your Home From Creditors

1. Using a Homestead Declaration to Protect Your Home From Creditors MontGuide 199815 Revised May 2012

2. Marsha A. Goetting Ph.D., CFP®, CFCSProfessor & Extension Family Economics SpecialistDept. of Agricultural Economics & EconomicsKeri D. HayesPublications AssistantDept. of Agricultural Economics & Economics

3. Question What is the $$ amount of equity in your home that a Montana Homestead Declaration (if recorded) protects against most creditor claims while you are alive?

4. Amount of home equity Montana Homestead Declaration protects? $250,000 $100,000 $ 60,000 $ 40,000 $ 20,000 8 Countdown 4

5. Question What is the $$ amount the homestead allowance protects against creditor claims after you die under the Montana Uniform Probate Code? 5 5

6. Amount of homestead allowance after death? $250,000 $100,000 $ 60,000 $ 40,000 $ 20,000 8 Countdown 6

7. Protection • Now up to $250,000 in value of a home against most creditor claims

8. Summary Homestead Declaration $250,000 (living) Homestead Allowance $20,000 (after death)

9. Prior Law • Exempt Property • $40,000 • $60,000 • $100,000

10. If previously filed declaration • Don’t have to refile to receive $250,000 protection

11. What is a Homestead? • House, condo, townhouse, manufactured home or mobile home • Land on which it sits • Any improvements, fences, etc.

12. Manufactured Home or Mobile Home • Owner does not have to own the land the mobile home/manufactured home is sitting on

13. Homestead • Must be person’s primary residence

14. Not Eligible • Doesn’t include: • Home furnishings • Appliances

15. Legal Value • Amount appearing on the last completed county assessment roll • From county treasurer’s office

16. Example: • Joe’s house: • Assessed value $80,000 • Mortgage Balance $50,000 • Protection $30,000

17. Example: • Doug & Laura’s house: • Assessed value = $275,000 • Mortgage Balance = $ 10,000 • Remaining Balance = $265,000 • ****BUT, Maximum Protection is $250,000

18. Who Should Sign? • Both spouses should sign the declaration • Must be notarized

19. Who Should Sign? • A spouse may acquire interest in property at marriage unless there is a premarital agreement

20. Tenants in Common • Each own individual interest • Can only file for portion of undivided interest

21. Tenants in Common: • Jack and Jill • Each can file for ½ of $250,000 or $125,000

22. Standard Form MSU Extension: www.montana.edu/extensionecon/financialmgtpublications.html 22

23. Homestead Declaration Form • A document that does not meet the requirements is considered Non-standard • Montana Code Annotated • §7-4-2636

24. Undo a Declaration • Declaration of Abandonment form • www.montana.edu/extensionecon/financialmgtpublications.html

25. Record • Clerk and Recorder’s office • In the county where the home is located

26. Recording Fees • Standard form • $7.00 per page • Non-standard form • $7.00 per page plus $10.00

27. No Protection • Creditor obtains judgment against the homeowner before declaration is filed

28. No Protection • Against liens for • Services • Supplies

29. No Protection • Failure to pay the mortgage

30. No Protection • Bankruptcy, unless filed before bankruptcy was declared

31. No Protection • Medicaid Estate & Recovery Program • Lien on home of homeowner in a nursing home whose medical costs were paid by Medicaid

32. MontGuide on the Web www.montana.eduSearch “Homestead Declaration”

33. Using a Homestead Declaration to Protect Your Home From Creditors MontGuide 199815 Revised May 2012