File a Declaration of Homestead

You can help protect your property against financial disaster and perhaps save money now by following this legal advice by filing a Declaration of Homestead.

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by AdobeStock/V. J. Matthew
A Declaration of Homestead is a simple legal document which can help to protect your house and property in times of economic hardship.

A Declaration of Homestead is a simple legal document which can help to protect your house and property in times of economic hardship. It has nothing to do with the process of filing a claim for unused government holdings. Rather, it’s a short form that can sometimes prevent the attachment of your land and dwelling by creditors.

Homestead rights don’t exist under common law, but they have been enacted in at least 27 states: Alabama, Arizona, Arkansas, California, Florida, Georgia, Idaho, Illinois, Kansas, Louisiana, Michigan, Minnesota, Mississippi, Missouri, Montana, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, South Dakota, Texas, Vermont, Washington, West Virginia, Wisconsin and Wyoming. If you own and live on property in any of these states, you should definitely take the hour or so necessary to file this important document. The fee for doing so is nominal, the forms are easy to fill out (they’re usually available at stationery stores), and no lawyer is necessary.

Though they vary from one state to another, homestead statutes are similar in intent. They’re designed to preserve family homes, which might otherwise be taken in times of monetary misfortune or upon the death of the head of the household. In general, this protection is available only if the declaration is filed in advance of such a catastrophe.

Of course, a legal judgment resulting from business losses, auto accidents, or suddenly inherited debts could take a family’s savings. But, with the safeguards provided by homestead statutes, their house and land would be protected up to the amount of exemption allowed by their state.

Say, for example, that your state has a $12,000 homestead exemption law, and your creditors are demanding $9,000. If your property is worth $12,000 or less, they can’t attach your home as payment for this debt. On the other hand, if you owe $15,000 and your home is worth $20,000, your creditors can get a court order that forces you to sell. Even then, you still have some protection, since — after the sale — you’ll get the $12,000 covered by your homestead exemption, and your creditors will receive only the remaining $8,000. You must, however, apply that $12,000 to the purchase of another home, usually within six months to a year, or your creditors can demand the additional $7,000 you owe them!

Furthermore, some kinds of debts must be honored with or without a Declaration of Homestead: If you’ve put your property up as collateral on a loan, for example, the homestead exemption does not apply. Other debts not covered include property taxes and special assessments. And if you fail to pay someone you’ve hired to make improvements on your house or land, he or she can place a mechanic’s lien on your property and have it sold in order to collect the money.

Although the cash value of homestead exemptions does vary, in most areas it’s periodically adjusted upward to keep pace with inflation. Therefore, it pays homeowners to keep pressuring their legislators to increase these exemptions as the price of real estate rises.

Fortunately, homestead laws are usually — in legal terms — “liberally construed.” An apartment (if you own it), a mansion, a cabin, or a tent can qualify as a homestead . . . provided the dwelling is the “bona fide residence of the claimant” If you haven’t built a house yet, you might still be able to “homestead” your future homesite: In one case, a 161-acre parcel in Texas was judged to be a homestead because the bankrupt owner had shown intent to build by drilling two wells and planting fruit trees. (I can only assume that the landowner was camping out on the property to meet the residency requirements.) A family is allowed only one homestead, though, and must “show good faith in their claim.” Summer vacation cabins, for example, on which declarations have been filed and accepted, have been taken away for debt payment.

Outbuildings and land that are used by the family for enjoyment or livelihood are generally considered part of the homestead. But adjacent lots — or parcels next to a home that are held for idle investment purposes — might not qualify, unless they’re gardened, logged, or farmed.

Generally speaking, homestead exemptions apply only to married couples and their families. (Some states do have a “head-of-household” exemption that covers two or more people living as a family unit, provided one person supports the other members of the group.) Should one spouse die, the survivor and any children are protected under the exemption until the survivor dies and the youngest child is of age. And, naturally, the exemption terminates if you sell the property. Claims can be filed on successive dwelling places, but only on one site at a time.

Some states — Alabama, Arkansas, California, Florida, Georgia, Iowa, Louisiana, Minnesota, Mississippi, Missouri, Oklahoma, South Dakota, Texas, West Virginia and Wyoming — even permit a tax credit for homestead property. In these states owners are allowed to deduct some set amount from their yearly property tax assessments.

If you’re among those folks lucky enough to live in a state that recognizes the Declaration of Homestead, you’d be wise to get in touch with your county clerk or recorder right away for complete information about the procedure. Filing the document is well worth the few dollars and the little time it requires. It’s a simple step that could save you money and it just might even save your home!

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