Daily Development for
Thursday, January 9, 1997

by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law

HOMESTEAD; TRUSTS: A trustee of an investment trust, who is also a beneficiary of a living trust, which in turn is a beneficiary of the investment trust, is not an "owner" of land held by the investment trust within the meaning of the statutory entitlement to declaration of homestead, even if the trustee occupies the land as her principal residence.

Assistant Recorder of the North Registry District of Bristol County v. Spinelli, 651 N.E.2d 411 (Mass. App. Ct. 1995).

The Homestead Statute does not provide for the application of the statute to property held in trust. Rather, it contemplates that the benefits of the statute will extend to the owner of the property and his family, if any. The statute makes no provision for property held in trust for the benefit of a settler who makes the property his or her principal residence. Having elected to place the property in trust, the plaintiff-trustee was not entitled to the protection afforded by a declaration of homestead either as trustee of the investment trust or as the occupant of the property.

The statute provided:

[a]n estate of homestead ... may be acquired pursuant to this chapter by an owner or owners of a home or one or all who rightfully possess the premise[s] by lease or otherwise and who occupy or intend to occupy said home as a principal residence."

The trustor argued that she was in fact both the owner and the occupant, albeit in different capacities. The court concluded that equitable ownership, such as that held by a beneficiary, is insufficient to invoke the statute, relying on nineteenth century precedent. The trustor then argued that the statute's language referring to persons who "rightfully possess the premise[s] by lease or otherwise . . . " ought to apply to parties holding such beneficial interests. Again, however, the court relied upon precedent, citing a Massachusetts cases stating that the purpose of this language was to permit homestead treatment for parties whose land interest is held under a ground lease but who own their house, and thus seek homestead protection for it.

The trustor's arguments that the court should consider the policy of the legislation and carry it out fell upon deaf ears. The court held simply that it was reading the statute literally, and that policy had nothing to do with it.

Comment 1: Whatever the merits of the policy discussion, the court's statement that it was ignoring policy and interpreting the statute "strictly" is absurd. The court obviously was interpreting apparently broad statutory language when it concluded that the term "or otherwise" did not apply to equitable ownership. Its conclusion reflected a policy determination to the same degree that a decision that the statute did cover equitable interests would have reflected policy. When the legislature adopts broad language such as "or otherwise," the court has no choice but to read the statute in accordance with the legislative intent. It was not bound by precedent, as no court had construed this precise language in this precise statute.

Comment 2: The editor is not familiar with the purposes for this array of trusts applying to a personal residence, but clearly many Americans are transferring their homes into living trusts for estate planning purposes. If such actions endanger their homestead protection, then clearly lawyers setting up these estate plans should be warning their clients of the potential adverse consequence set forth in this case.

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