Legal News & Articles
New Homestead Law Creates Estate Planning Opportunities
Earlier this year revisions to the Homestead Law were enacted dramatically revising the homestead protection available for primary residences. By declaring a homestead in one's primary residence, you can receive up to $500,000 of creditor protection against certain creditors. It's akin to an umbrella liability insurance policy but also protects against contract claims in addition to tort based claims that an insurance protects you from.
This homestead protection is so valuable that prior to this change in the law estate planners were reluctant to transfer a primary residence to a trust out of fear that the homestead would no longer be available. This was always frustrating from an estate planning perspective because estate planners prefer to put property in trust to avoid the headaches, delay, cost and public nature of probate administration.
As of March 16, 2011, the law now expressly allows a trustee of a trust to declare a homestead for the benefit of a trust beneficiary using property of the trust as a primary residence. Therefore in many cases it may be preferred to have a trust own your primary residence. If your estate plan already includes a trust, for the cost of a deed, trustee certificate and recording fees (just a couple hundred dollars) an individual can transfer their property to trust allowing for a speedy sale of the property without probate court involvement after their death (potentially saving thousands). If your current plan does not include a trust, now may be the time to revisit whether a trust should be part of your estate plan.
While this is a great planning opportunity for many people, it may not be the best option in your particular circumstance. Attorney Peter C. Herbst Jr. concentrates in Real Estate and Estate Planning and is currently pursuing a Masters of Law in Taxation at Boston University.