Important amendments were made in December 2010 to the Homestead Act (Mass. General Laws, Ch. 188) and go into effect on March 16, 2011. The Homestead Act gives homeowners protection against subsequent attachment, suit, or bankruptcy to the extent of $500,000 of equity per residence, per family. This legal document, called a Declaration of Homestead, is filed at the registry of deeds, at time of purchase of a primary residence. It's important to note that while a Declaration of Homestead can protect the equity in many cases, tax obligations and child/spouse support obligations are not covered.

One of the most significant changes to the Homestead Act is that homeowners are now allowed to maintain the same Homestead protection on the proceeds of the sale. It also extends to pre-existing debts or insurance coverage. The Homestead protection is available for a period of one year from the time of the sale, or when a new primary residence is purchased, whichever happens first. This change gives homeowners more flexibility in a variety of situations such as a desire to downsize from their current residence, relocation for work related purposes, or may allow a person to still purchase another home if they have debt related issues.

If you want to obtain the maximum coverage of $500,000, it's important to note that you will need to file the Declaration at the registry of deeds. Otherwise, there will be an automatic coverage amount of $125,000 without filing. The automatic coverage protection was put into place for homeowners who may not be aware of the changes made to the Homestead Act.

Other changes to the Homestead Act include protection for homes held by a trust and that a new Declaration is unnecessary after refinancing. It also prohibits lenders from requiring a waiver or release of the Homestead. Lastly, four-family homes will qualify for Homestead protection.

If you are purchasing your new principal residence, your closing attorney must provide you with notice of your right to declare a homestead protection. You will be asked to acknowledge receipt of this notice in writing.

If you filed a homestead declaration prior to March 16, 2011, your $500,000 protection will continue to apply.

If you are thinking of buying or selling a home, I encourage you to consult with an attorney regarding specific legal questions regarding the Homestead Act, as well as other issues that may arise during your real estate transaction.