Cape Cod Barrister

Cape Codders: Is Your Homestead Protecting You??

An excellent article in this weeks Massachusetts Lawyers Weekly by Attorney Gary M. Hogan addresses an issue that has long troubled real estate attorneys; is a Homestead filed by the trustee of a trust, legitimate protection from creditors?

Mass. General Laws Ch. 188 protects up to $500k in equity in a debtors principal residence. Until a recent decision from the bankruptcy court, it was understood by practitioners that a person that was both a trustee and a beneficiary of a self settled trust could not take advantage of the statute, even if they resided at the property. In the case of In re Rodriques, Judge Feeney recently held that a woman that was the trustee of her own revocable trust acquired homestead protection under the statute because she enjoyed "rightful possession" pursuant to the broad powers of the trust.  She focused on the language of the statute that gives homestead protection to "an owner or owners of a home or one or all who rightfully possess the premise by lease or otherwise and who occupy or intend to occupy said home as a principal residence."

One problem with the decision is that it is still unclear whether or not many homesteads currently filed by trusts that include language of "ownership" and "occupancy" but do not state that the property is occupied by lease or otherwise, are legitimate.  In Rodriques, Judge Feeney ruled that the  the trust, with it's broad trustee powers, "otherwise" authorized  possession of the property.

In light of this decision, any homesteads filed by trustees of trusts should be carefully reviewed to see if they satisfy the language in the decision. There is legislation pending that would allow beneficiaries of a trust to claim homestead protection, but no one knows if these bills will be enacted.

Bruce A. Bierhans