Under Montana law, homeowners can record a document called a homestead declaration on their property title to protect equity in their home from creditors.  This is a document you record separate from the home-buying process.  You can only record a homestead declaration on your primary residential property.  A mobile or manufactured home also qualifies as a homestead, even if it is on a rented lot, provided it is your primary residence.  And if your primary residence is owned by your revocable living trust, it can also qualify for a homestead declaration. 

The homestead declaration must be signed by the property owner(s), include a statement that the property is your residence, and include the legal description of the property.  The legal description is found on your deed to the property, and simply listing the property address is insufficient.  And, you record the declaration with the clerk and recorder of the county in which the property is located. 

The homestead declaration will protect the equity in your homestead up to $409,450, and it may protect your home from being sold by a creditor.  However, to receive this protection, the declaration must be properly completed and recorded prior to a creditor obtaining a judgment against you. 

If the judgment or debt against you is less than the equity in your home and less than $409,450, your home will be protected from sale to satisfy the debt.  However, if the judgment or debt is more than $409,450, a court may order the sale of your property, but you would receive the first $409,450 from the sale proceeds before a creditor would be paid.  The amount of equity protected, $409,450, increases 4% each year. 

Importantly, the homestead declaration will not protect against defaulting on a loan secured by the real property (i.e., your mortgage), failing to pay property taxes or assessments, or failing to pay a contractor for services performed or materials they provided.  It also does not protect against a Medicaid lien. 

While you may not have creditor issues or judgments against you now, you don’t want to wait until you have creditors or are filing bankruptcy to record the homestead declaration as it must be recorded before a creditor obtains a judgment against you, and typically before you file bankruptcy.  Think about the unexpected catastrophic illness or accident for which you might have insufficient insurance coverage – having a homestead declaration in place now can provide important protection for you in the event of the unexpected catastrophe.

Talk to an attorney for assistance with obtaining the protections of a homestead declaration.