Your Timeshare: What to do with it?
Timeshares have come a long way since they first arrived in the real estate market back in the ’70s. In the early days of timeshare ownership, high-pressure sales tactics, exceedingly vague contracts, and inflexible scheduling policies caused many people to quickly regret such purchases. Over time, however, timeshares have become more consumer-friendly with greater transparency in the terms of the contract, more flexibility in scheduling timeshare weeks, more diversity in the location of the vacation properties, and less pressure during the sales experience. That is not to say that all timeshare companies are ethical and transparent. There are plenty of modern-day examples of abuses within the timeshare industry. It is not uncommon to find very happy timeshare owners who have obtained great value out of their timeshares and view them as highly valuable and desirable property in their estates.
When it comes to your estate planning though, how should you handle your timeshare? If you have a revocable trust, should you transfer ownership of the timeshare to your trust? Should you instead continue to hold it in your name, or jointly with another family member? What if you do not use it very often and, despite your efforts to get your adult children to use it, it mostly just goes unused? Here are a few things to consider when deciding how to plan for your timeshare.
The Case for Owning Your Timeshare in Your Trust
Suppose you find significant value in timeshare ownership. It may be worth the effort to purchase the timeshare in the name of your revocable living trust initially. If you obtained ownership before the formation of your trust, however, you may want to consider retitling the contract in the name of your living trust. In some states, and depending on the timeshare contract, you may be an owner of rights in real property. This is important to know because in most states if you die owning real property, it will be subject to an often timely and perhaps expensive probate proceeding for it to pass to your heirs unless it is owned through a probate avoidance tool such as a living trust, joint ownership with rights of survivorship, or payable on death or transfer on death designation. Owning your timeshare in your revocable trust is one of the most common ways to ensure that your named trust beneficiaries will have the right to either use or take ownership of your timeshare after you are gone without needing to utilize the probate court to do so.
When you first purchase a timeshare, it is crucial you understand the requirements to transfer the timeshare at your death. If the person selling the timeshare to you cannot with certainty tell you how you can transfer the timeshare (and show you language in the contract supporting their answer), you should seek the counsel of an experienced timeshare or real estate attorney before signing the contract. This distinction can make a difference of thousands of dollars of probate costs and frustration upon your death or disability. You will also want to check your contract or with the timeshare management company to determine whether there will be a fee assessed for the transfer of your timeshare from your name to the name of your trust. Some timeshare companies charge steep fees for transfers like these.
Ultimately, the decision to title your timeshare into the name of your trust is a very fact-specific decision. Asking questions and reading your timeshare contract carefully can help you avoid costly mistakes.
Reasons Not to Title Your Timeshare in the Name of Your Trust