Asset Protection Asset Protection

Protecting Your Assets

Homestead Declaration Laws

Even though placing a lien on property is the least frequently employed method of judgment collection, there is another step you can take to protect yourself in the event a creditor does go after the equity in your home. After all, why not be extra careful? If you're like most Americans, your greatest asset is your home, especially if you've lived there for a number of years and have built up a lot of equity. Why not do everything you can to protect it?

All you have to do is file a Homestead Declaration with your state before a judgment is awarded, then judgment creditors cannot touch part or all of your equity, depending on the rules in your state.

Here's an example. Say you live in Massachusetts, own a home, and that home is your principal residence. Simply go to your local county office and fill out the "Declaration of Estate of Homestead" form (that's what they call it in Massachusetts). It's a simple form that asks for basic information—you won't need a lawyer or other professional to help fill it out.

If you live in Massachusetts, once the form is filed you are protected against attachment up to $500,000. In other words, if you have less than $500,000 equity in the home, it's now safe from liens by judgment creditors.

And if that's not enough reason, filing a Declaration of Estate of Homestead form can also protect the value of your home if you pass away. The residence is protected until your surviving spouse remarries or dies and until your youngest unmarried child reaches the age of 18. If the judgment expires in the meantime, your family's equity is still safe even though you're no longer around.

Keep in mind that every state is different. In Virginia, for example, the Homestead Exemption is limited to $5,000. While that pales in comparison to Massachusetts' Homestead Exemption, it is still worth the nominal filing fee.

Some states do not provide homestead rights at all, some require you to file a Homestead Declaration, and others provide homestead exemptions without requiring you to file. Here's a breakdown:

No Homestead Rights
  • Delaware
  • New Jersey
  • Pennsylvania
  • Rhode Island
Homestead Declaration Must Be Filed
  • Alabama
  • Louisiana
  • Massachusetts
  • Mississippi
  • Montana
  • Nebraska
Homestead Declaration Not Required
  • Alaska
  • Kentucky
  • Michigan
  • Missouri
  • Nevada
  • New Mexico

If your state is not listed above, filing is considered to be "elective"; you can choose to do so or not. What should you do? File the Homestead Declaration today!

It only makes sense. If you are fortunate enough to live in a state that has enacted homestead laws, why wouldn't you file a Homestead Declaration as soon as possible? Always do everything possible to protect your legal rights. And besides, your state requirements may change without you noticing—after all, how often do you check to see what your state legislature is up to?

To determine the specific filing rules and guidelines for your state, do a web search using the terms "homestead declaration yourstate", or call your local county office. In some cases you will be required to file the form in person or have it notarized, so make sure you ask questions to learn exactly how the process works.

And while we're talking about Homesteads, in some states you can also file what is called a Homestead Exemption (some locals use this term interchangeably with Homestead Declaration), which provides exemption from some portion of the real estate taxes you are required to pay each year.

For example, if you live in Texas and your home is worth $200,000, you may qualify for a Homestead Exemption of $15,000, meaning property tax will only be assessed against $185,000 in value. And if you're over 65, you qualify for an additional $10,000 exemption. Some counties in Georgia offer what is called a "Homestead Valuation Freeze Exemption," which is a fancy way of saying your property taxes won't go up even if the value of your home does. Again, every state is different, so check your particular state tax codes to see what applies to you. Or, simply ask at your county offices; they can fill you in.

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