Revocable Trusts can be a good way to protect your assets from the probate process. Properly drafted and executed, assets will automatically transfer to your loved ones upon your passing. It also allows you to retain control over your assets while you are alive and gives you the ability to alter the trust as you see fit.
A common misconception regarding a Revocable Trust, however, is that they have some ability to protect your assets from creditors. It is important to know that this is not the case. Because you retain primary control of your assets, with the ability to alter the trust at any time, creditors are still able to access the assets to satisfy debts.
Fortunately for Massachusetts Residence, there is a way to protect your home from most creditors while having it in a Revocable Trust. This protection is known as the Homestead Protection Act.
The Homestead Protection Act, protects your primary residency from unsecured creditors. These creditors are, for example:
- Someone that slips and falls on your property
- Medical Bills
- Credit Card Bills
- Someone that sues you for something that happens while you are on the job
- Someone you get into a car accident with; and
- Many more
The Homestead automatically protects the equity in your home for up to $125,000.00. But, many Massachusetts residence own homes that are worth more than $125,000.00. For these individuals, a Homestead can be filed with the Registry of Deeds and the protection will be increased to $500,000.00. For many this is the difference between a completely protected home and a home that is vulnerable to creditors.
Before March of 2011, this protection was only available to individuals that owned their homes in their own name. Once the property was placed into trust, the protection was lost. However, in March of 2011 the Homestead Act was extended to properties held in revocable trusts if proper requirements were met. A homestead must be filed with the registry of deeds and it must state that the property is owned in trust and that the primary beneficiaries currently or intend to live in the property as their primary residency. Once this is done, your home will have the best of both worlds; the future protections of a trust and the present protections of the Homestead Protection Act.
By putting your property in trust, you are saying that you are concerned about the loved ones that you will leave behind. You are allowing your loved ones the ability to avoid the probate process and the time and money that goes along with it. It only makes sense that you would want to take this simple step to protect one of your most valuable assets while you are alive. By putting your property into a trust with a Homestead Protection, you are protecting it from both the probate process and most creditors.