Judge Boroff of the Massachusetts Bankruptcy Court has held that an owner of a remainder interest in a home could not claim a homestead exemption. The case is on re Gordon, Case No. 11-44524 (Bankr.D.Mass August 28, 2012).
In Gordon, the debtor held a remainder interest in her home. All first-year law students learn about remainder interests during their first weeks of property class. A remainder interest exists when someone owns a life estate (i.e. owns a property just during their lifetime without the power to sell or devise the entire “fee simple” interest in the property – also called a “life tenant”) and another person is entitled to the property after the death of the life tenant. Thus was the case here. The debtor owned a 1/4 remainder interest in her home. To be entitled to a homestead, as the Court put it: “‘the Debtor (1) must be an “owner'”; and (2) must “‘occupy or intend to occupy the home as [her] principal residence.'” It was undisputed that the debtor occupied the home as her principal residence, but the case turned on whether she was a “owner.” The court said no.
The Massachusetts Homestead Statute defines “owner” as “a natural person who is a sole owner, joint tenant, tenant by the entirety, tenant in common, life estate holder or holder of a beneficial interest in a trust.” Mass. Gen. Laws ch. 188, §1. Because the debtor did not hold one of the enumerated interests in property, the court held that the debtor wasn’t an “owner” and, consequently, could not claim the protection of the homestead exemption.