If you own a home in Massachusetts, you already benefit from a valuable layer of legal protection through the state’s Homestead Protection Act. But here’s the part most homeowners overlook: if the equity in your home exceeds the exemption limit, that excess equity is vulnerable in the event of a lawsuit. Understanding the scope and limits of this protection is essential to safeguarding your most valuable asset—your home.
Understanding the Massachusetts Homestead Act
The Massachusetts Homestead Act was significantly updated in August 2024. The law allows homeowners to shield a portion of their primary residence’s equity from certain types of creditors. There are two types of homestead protections:
Automatic Homestead
All Massachusetts homeowners receive an automatic exemption of up to $125,000 in home equity protection without having to file any paperwork. This coverage applies as long as the property is your primary residence.
Declared Homestead
By filing a Declaration of Homestead with your local Registry of Deeds, you can increase your protection up to $1,000,000 in equity. This declared protection applies to:
- Single homeowners
- Married couples
- Families
The process is simple: complete the form, get it notarized, and file it with the appropriate registry. A one-time filing fee of approximately $35 applies.
Special Protection for Elderly and Disabled Homeowners
If you are 62 years or older, or legally disabled, you may file for an elderly or disabled homestead. This offers up to $1,000,000 per qualifying individual. For a married couple where both qualify, the combined protection can reach $2,000,000.
What the Homestead Act Does Not Protect
While the Homestead Act offers powerful protections, it does not guard your home equity against every type of claim. The following are some, but not all, of the exceptions:
- Federal, state, or local tax liens
- Mortgages and home equity loans
- Court-ordered child or spousal support
- Liens recorded before the homestead declaration
- Debts incurred for home improvements (e.g., mechanics’ liens)
- Nursing home lien (a lien by the Office of Medicaid as a result of payment for Medicaid benefits)
What If Your Home Equity Exceeds the Homestead Exemption?
This is the important question.
Let’s say your Massachusetts home is worth $1.5 million and your mortgage is paid off. If you’ve filed a declared homestead, $1 million of that equity is protected. The remaining $500,000? Vulnerable to creditors.
In the event of a lawsuit or judgment, a creditor could potentially force a sale of your home. You would receive your protected amount, but the unprotected equity could be seized.
With rising property values across the Commonwealth, many homeowners now have equity that exceeds the statutory limit. If this sounds like your situation, it’s time to consider more robust asset protection strategies.
How to Protect Equity That Exceeds the Homestead Limit
There are several legal tools available to help shield excess home equity beyond the Massachusetts homestead exemption:
1. Irrevocable Trusts
Transferring your home into a properly structured irrevocable trust (i.e. a qualified personal residence trust) can remove it from your personal estate and help protect it from future creditors.
2. Limited Liability Companies (LLCs)
In some situations, placing a property into an LLC can offer an extra layer of liability protection, especially for multi-family or rental properties.
3. Equity Reduction Strategies
Strategically reducing your home’s equity through loans or lines of credit may limit what creditors can access—though this comes with its own risks and should be done thoughtfully.
Each option has advantages and disadvantages you should carefully consider. It is important to consult with an experienced asset protection attorney to determine the best option for you.
Meet with an Asset Protection Attorney
The Massachusetts Homestead Act offers a powerful first layer of protection—but it may not be enough on its own. If your home equity exceeds the homestead exemption, your personal assets could be at risk.
At Skabelund, our experienced legal team specializes in designing custom plans that go beyond basic exemptions. We help clients protect their homes, their families, and their financial futures.
Don’t wait until a lawsuit or claim puts your home at risk. Contact us today to discuss your options and protect what matters most.
