Real Estate Trust Beneficiaries are Not Protected Under the Homestead Act–Holds the SJC

The 2004 Homestead Act Does Not Protect a Real Estate Trust Beneficiary Occupying Her Home as a Tenant At Will: Boyle v. Weiss (Slip Op., SJC-10933)(Feb. 16, 2012)

Summary: In a case of first impression, the debtor, who was also the primary occupant of the residence,  claimed an exemption for her “[b]eneficial interest in The Westview Realty Trust, which holds title to real property used as the [d]ebtor’s [r]esidence.” The bankruptcy trustee objected to the debtor’s claim of the exemption, arguing that under Massachusetts law a trust beneficiary residing in property owned by the trust may not acquire a homestead estate.  The Homestead Declaration was filed by the debtor before the 2010 revisions to the Homestead Act, therefore the Court applied the 2004 version of the statute.

The issue here, as framed by a certified question from Bankruptcy Court to the SJC, was whether “the holder of a beneficial interest in a trust which holds title to real estate and attendant dwelling in which such beneficiary resides acquire[s] an estate of homestead in said land and building under G.L. c. 188 §1 (the Homestead Act).”  The Court held that it did not, and that the 2004 version of the statute did not give the debtor, who at the time was also occupying the property as a tenant at will, the privilege of claiming a homestead exemption.  Specifically, she was not an “owner” as defined by the Homestead Act.

The debtor further argued that the 2010 revision of the Homestead Act clarified the 2004 Act by expressly extending protection to a trust beneficiary.  The 2010 act authorizes the ‘owner’ of a home to file a homestead declaration and, critically, defines owner as “a natural person who is the sole owner, joint tenant, tenant by the entirety, tenant in common, life estate holder or holder of a beneficial interest in a trust.” See G.L. c. 188 §3, as appearing in St. 2010, c. 395, §1 (emphasis added).

However, the SJC rejected that argument, and held that the 2010 revisions substantively expanded the class of persons eligible to benefit under the statute, which further indicated that the 2004 version did not protect the debtor under her status as a trust beneficiary.  Under the 2004 version, the debtor was found to have only a personal property interest in the trust.

Implications:  The 2010 revisions to the Homestead Act went into effect on March 16, 2011.  Homesteads declared before that will be subject to interpretation under the 2004 version—and there are certain classes of persons that will not be protected.  Specifically, the 2010 version extended protection to two new classes: “holders of life estates and holders of beneficial interests.”  Although you can re-file a declaration of homestead that was filed before March 2011, any judgments or claims that may have arose before the re-filing will not be subject to homestead protection.

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