Let me start by saying that I love timeshares. I enjoy staying at timeshares on vacations. You can meet many friendly people while BBQing your dinner, sitting by the pool, playing ping pong, or at some of the organized activities. I also think they are fascinating from a business perspective. I like reading about the exchanges between timeshare salespeople (who seem to trump used car salesmen for stories) and innocent vacationers. This post is not to bash on timeshares but is merely a reminder of some things to think about when you are buying a timeshare.
Yes, a timeshare is an asset. In fact, just as the salesperson told you, it can be willed to your kids or other loved ones. I try to always ask clients about any timeshares they own when going through my estate planning questionnaire. I want to make sure to include it in their plan.
Owning a timeshare in a trust is important to make things easy on your loved ones. This is especially true for out of state real property (“deeded”) timeshares. If you live in California and own a deeded timeshare in Hawaii, Nevada or elsewhere you should be sure to put your timeshare into your living trust. This can be a huge problem after death!
However, today’s blog post is not focused on the asset planning side of timeshares. I want to talk about the side that the salesperson probably didn’t tell you as you sat on the patio overlooking the might Pacific ocean. They told you it’s an asset that can be willed to your kids. Did they tell you it’s a LIABILITY that can attach to your estate like a leech and never let go?
Maintenance fees or “MF’s” to timeshare experts are not talked about at great length during the typical timeshare sales presentation. Yes, it’s mentioned but it’s not mentioned that those MFs keep going, after you die, like the energizer bunny! They keep piling up until someone does something, legally, to stop it.
Your timeshare is actually a CONTRACTUAL OBLIGATION. It’s a contractual obligation where you agree to keep paying MFs until the end of time. The problem for your family is they can’t just disclaim the timeshare because the liability is still there. The liability attaches to your estate. A timeshare company could literally open probate, as a creditor, and suck assets out of your estate. If there are no probate assets it can get a judgement and go after trust assets. In some cases it can get a judgement and go after individuals who received assets from you at death.
I am not saying your family will have this happen but they can. Many timeshare companies will except the deed back, after death, and not go after the estate. However, that’s not a guarantee.
This problem is compounded when the timeshare is not in a trust. It’s compounded because your loved ones have to somehow clear title and this often means probate Court. In a case where the timeshare is in another state this can mean a multi-state probate. This means BIG MONEY! This often means spending much more money on the probate than the timeshare is worth just so your kids can give the timeshare back to the timeshare company or sell it (or give it) to someone else it.
If you have a trust then talk to your attorney about getting your timeshare into it. If you don’t have a living trust, and are in California, contact me to get one set up! -John