The Homestead Cap and the Transfer of Trust Property

18 Apr The Homestead Cap and the Transfer of Trust Property

The Bankruptcy Appellate Panel for the First Circuit in the case of In re Aroesty, 2008 WL 976842 (1st Cir.BAP 2008) recently considered whether the transfer of real estate from a trust in which the debtor was the sole beneficiary to himself constituted a transfer of an interest within 1215 days resulting in a limitation of the homestead amount.

In Massachusetts, a homestead usually extends to $500,000 in equity. However, when a debtor acquires an interest in a homestead within 1215 days of a bankruptcy, the homestead is limited to $125,000 (this cap is indexed and adjusted upwards periodically). The debtor argued that he acquired no interest because he was already the sole beneficial owner of the property when it was transfered. The Panel disagreed and held that the legal title that the debtor acquired was an “interest” sufficient to trigger the homestead cap under Section 522(p)(1) of the Bankruptcy Code.

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