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Massachusetts High Court Rules Debtor May Not Claim Homestead Exemption for Home Held in Trust - Boyle v. Weiss

February 20, 2012

Vincent Howard and our team of Norco foreclosure defense attorneys frequently handle bankruptcies in which the homestead exemption is a major factor. The homestead exemption allows a significant portion of the home's value to be exempted from bankruptcy, which in turn prevents filers from losing their homes under many circumstances. In fact, since the housing bubble burst a few years ago, bankruptcy has been an important strategic tool for homeowners who are determined to keep their homes (though it's not smart or possible in every circumstance). So we were interested to see an unusual decision of the Massachusetts Supreme Judicial Court in a case where the beneficiary of a trust was attempting to claim a homestead exemption. In Boyle v. Weiss, the court ultimately found no exemption where the filer did not control the trust or own more than 50 percent.

The debtor is Roberta Boyle, who lives in the disputed homestead in Lowell, Mass. The home was conveyed to a trust in 1990, and Roberta Boyle holds 50 percent of the beneficial interest of the trust; the other 50 percent is held by her father, Robert Boyle. Roberta is a tenant to the trust. In 2010, she filed a declaration of homestead in the property, then filed for Chapter 7 bankruptcy, claiming an exemption for her beneficial interest in the trust. The bankruptcy trustee objected, saying Massachusetts law does not allow a beneficiary to acquire a homestead estate. The bankruptcy court certified a question to the Supreme Judicial Court of Massachusetts: "May the holder of a beneficial interest in a trust which holds title to real estate and attendant dwelling in which such beneficiary resides acquire an estate of homestead in said land and building under [Massachusetts law]?"

The high court ultimately said no, declining to allow Boyle the homestead exemption. Boyle argued that caselaw requires the homestead statute to be interpreted liberally, and she is both an owner and a tenant on the property. However, the court said, Boyle is not an owner within the meaning of the homestead statute because that statute allows only for ownership by a sole owner, joint tenant, tenant in common or tenant by the entirety. The trustee could serve her notice to quit within 14 to 30 days. Furthermore, the terms of the trust do not make Boyle even an indirect owner, because she doesn't have a controlling interest, the court found. She also argued that if not an owner, she still possesses the property "by lease or otherwise," as state law provides -- but this argument was also rejected as incompatible with an 1863 ruling (and a later 1990s ruling). In a footnote, the court noted that Boyle's homestead registration was invalid in any case, since the trustee would have to register the homestead.

Led by partner Vincent Howard, our Garden Grove foreclosure defense lawyers help clients unravel tricky legal ownership issues like this all the time. Most people don't put their homes in a trust, of course, but this may be done by older people who are trying to avoid the probate process, or in other situations where they want to be clear on how assets should be transferred. This strategy can complicate what might otherwise be a simple part of a bankruptcy, because the owner of the trust must be the one involved in the bankruptcy. For debtors like Boyle, this situation is also less than perfect because it denies them a large bankruptcy exemption. That's why Vincent Howard and our Downey foreclosure defense attorneys prefer to discuss complications and legal strategies from the beginning of a case.

If you're facing foreclosure and you'd like to talk about your rights and your legal options, you should call Howard Law, P.C., as soon as possible. You can reach us through our website or call 1-800-872-5925.

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