What is homestead and what it means to you?

Homestead is technically an artificial estate in land, created to protect the possession and enjoyment of the owner against the claims of creditors by preventing the sale of the property for payment of the owner's debts so long as the land is occupied as a home.

Laws exempting the homestead from liability for debts of the owner are strictly of U.S. origin. Under the English Common Law, a homestead right, a personal right to the peaceful, beneficial, and uninterrupted use of the home property free from the claims of creditors, did not exist. Homestead rights exist only through the constitutional and statutory provisions that create them. Nearly every state has enacted such provisions. The earliest ones were enacted in 1839 in the Republic of Texas.

The State of Washington has a statute that provides for an automatic homestead - RCW 6.13. This statute was created in 1981. Prior to this law it was necessary for homeowners to record a formal declaration of homestead. The homeowners who filed said declaration had protection, others had not. In Washington state, if you own a home, you have the homestead protection.

The following is for general informational purposes only and should not be considered legal advice. Therefore, I suggest that you contact an attorney for any legal advice on your specific situation.

What is the purpose of the homestead exemption? The homestead exemption gives you rights against many debts you might incur through accident, illness or misfortune. However, there are limitations and exceptions. The policy underlying homestead laws is to provide a place for the family where they may live free from the anxiety that it may be taken from them.

How does the homestead exemption work? Example: You own only one primary single family home valued at $300,000 with $150,000 mortgage. Judgment was brought to you $150,000 satisfaction of liens. In Washington state, the Homestead law protects homeowner to a limit of $125K. Here you have an equity of $150,000 and therefore creditors can take only $25,000 (150,000-125,000=25,000) when you sell (you might be forced to sell).

Example #2: In the scenario above, if you have $180,000 mortgage in the home worth $300,000, then the net proceeds from Homestead calculation is $300,000-$180,000=$120,000, which is less than $125,000 limit. Then the judgment against you can not force you to sell the home to satisfy the creditors.

What is a judgement lien? When you owe someone money they are considered your creditor. If a creditor sues and wins a judgment against you, they can file a lien against your home. The homestead exemption is protection against such liens.

What kind of property is covered? A house, a condominium, a mobile home.

Who is eligible for this homestead exemption? Every homeowner who resides in his or her home is entitled to this protection. A person can only have one valid homestead at a time.

Are there limits to the amount of equity protection? The homestead exemption is up to $125,000. Also, the same property may not be claimed separately by spouses to increase the value of the exemption.

What situations are not covered by the homestead exemption? Judgment liens recorded will attach to the property. Loans or debts secured by the property (mortgages, deeds of trust, etc.) are not covered by the homestead exemption. When you voluntarily put up your home as security against a debt, a homestead will not protect it. When a contractor or laborer puts labor or materials into repairs or improvement on your property, and you do not pay him, the homestead exemption will not protect against the mechanic’s lien. Tax liens by federal, state and local governments and debts arising from child support are also not protected by homestead.

Does homestead protect my spouse if they do not own our home? When property is acquired by an unmarried individual who later marries or enters into a domestic partnership or by a married person as a separate estate, it is necessary to determine if the spouse or domestic partner resides at the subject property. Even if they are not a vested owner, if they reside at the subject property they will need to join in any conveyance in a sale transaction or security interest in a refinance transaction to consent to the conveyance or encumbrance of their homestead. A Quit Claim Deed to their spouse or domestic partner is not sufficient.