From time to time, federal or state courts will face important questions regarding the state / impact of Massachusetts’ law, for which there is little or no precedent to allow them to formulate a principled and proper answer. When faced with such a situation, one option they have is to “certify” the question of state law to the Massachusetts Supreme Judicial Court, which is the highest state court in Massachusetts, and the ultimate authority on interpreting Massachusetts law.
Recently, the Massachusetts Supreme Judicial Court was asked to interpret the state’s Homestead Protection statutes (codified at M.G.L. c. 188, §§1 – 14) by the United States Bankruptcy Court for the District of Massachusetts. The issue was whether a trust beneficiary, by filing a Declaration of Homestead, could obtain Homestead protection for a property owned by the trust and that the beneficiary resided in as a tenant at will. Based on the language of the statute in effect at the time the Declaration of Homestead was recorded and the bankruptcy petition was filed, the Supreme Judicial Court answered the question in the negative on February 16, 2012.
Based on changes to the Homestead laws that went into effect in March 2011, including to the definition of “owner” as codified at M.G.L. c. 188, § 1, the Supreme Judicial Court’s answer would likely have been the opposite if the question arose under the law as it now exists. In any event, LaFountain & Wollman, P.C., feels this decision serves as an excellent reminder of the importance of filing a proper Homestead Declaration by all property owners eligible for protections under the Homestead Act. Doing so can protect your equity in the property, up to the amount of $500,000.00, from being reached by creditors. Although it is true that the new laws provide an automatic homestead exemption in some situations as well, the automatic exemption is limited to $125,000.00 in equity, a mere 25% of the maximum protection available. Based on property values in Massachusetts, there is rarely, if ever, a good reason to forgo filing a Declaration of Homestead on one’s primary home.