Can the holder of a remainder interest claim a homestead in Massachusetts?

The new Massachusetts homestead act, enacted in 2010 and effective on March 16, 2011 has begun to generate court decisions interpreting its new and unique provisions.  The new law introduced some novel ideas about homesteads, such as:

  • Multiple owners can each claim a homestead up to their proportionate share of ownership (under the old law, only one person could declare a homestead);
  • Every owner obtains an automatic $125,000 homestead without having to file any papers or record any instruments at the registry of deeds.  There was no such thing under the old law.
  • Beneficiaries under a trust can claim a homestead, something unheard of under the old law.

All these new provisions now must be fine-tuned by the courts as unique facts present themselves in different cases.Burgdorf,_Idaho,_Homestead

In In re Gordon, Case No. 11-44524 (Bankr.D.Mass August 28, 2012), Nicole Gordon claimed a homestead exemption on property she lived in, but had been owned by her mother for many years.  A few years before she filed bankruptcy, Nicole’s mother signed a deed conveying the property to the mother “for life” with the “remainder interest” to Nicole and her three siblings.  This means that Nicole’s only interest in the property was a “remainder interest.”  A remainder interest does not vest until the expiration of the prior interest.  In other words, Nicole’s ownership does not vest until after the mother dies.  And, of course, if Nicole were to die before the mother, Nicole’s interest would never come into fruition at all. (In the old days, this was called an inchoate interest — one that might never happen; and the two parties were called the “life tenant” and the “remainderman”).

Judge Henry Boroff looked to the new statute to see if Nicole could claim a homestead as the holder of only a remainder interest. First, he observed that the new statute had two requirements:  (1) a person must “occupy” the property; and (2) must be an “owner.”  There was no dispute that Nicole occupied the property; she lived with her mother, although it was after her divorce and might not have the ring of permanence, the statute only says she must “occupy” it, and that she did, at least for now.  The second element, however, was the problem.  An “owner” is specifically defined in the new law: “a natural person who is a sole owner, joint tenant, tenant by the entirety, tenant in common, life estate holder or holder of a beneficial interest in a trust.”  Because Nicole was not one of those, she was not entitled to claim the homestead. Only those specifically enumerated interests are entitled to homestead protection, and “remainder” interests were not included by the legislature.

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