Passing a timeshare to heirs may not be the best idea.
Many people choose to buy a timeshare to make vacation ownership more affordable.
A few of my business owner clients have timeshares to force themselves to take a vacation!
Although those who own timeshares may have many fond memories as a result of their purchase, heirs may find inheriting a timeshare to be a headache.
Why?
Timeshares do not function the same as traditional real estate when inherited.
They often come with restrictions on resale, ongoing maintenance fees, and unexpected legal obligations.
Deciding on whether to sell, keep, or disclaim inherited timeshares can be easier to do when beneficiaries understand the downsides of inheriting this type of asset.
Inheriting a timeshare is often the opposite of paradise.
Timeshares are more complex than traditional real estate with restrictions and mandatory fees.
Many heirs would consider this a financial liability rather than a beneficial gift.
Maintenance fees are a significant issue with inherited timeshares.
These fees generally increase each year at a faster rate than inflation.
Even if the timeshare is not used, the fees must be paid.
For many places, this expense alone can be thousands of dollars annually.
Yikes!
What happens if heirs fail to pay?
Neglecting this bill could lead to credit damage, collections, or foreclosure.
Although many timeshare owners and their heirs assume the property could be sold after inheriting, resale is notoriously challenging.
Why?
Timeshares often have little market value and depreciate quickly.
Even if the location is highly desirable, buyer demand can be limited.
Additionally, many contracts include clauses restricting transfer or resale options.
Heirs could find themselves trying to offload a timeshare for years before they finally accept the reality of being stuck with paying fees indefinitely.
Heirs will become legally responsible for all associated costs when timeshares are deed properties.
What does this mean?
The management company will be able to take legal action for collecting unpaid fees.
Multiple heirs may be requested to share financial obligations as a result of state inheritance laws.
Some contracts will bind heirs indefinitely.
Although a timeshare may initially seem like a good deal, the restrictions and long-term costs often eclipse possible benefits.
Heirs may refuse to accept a timeshare inheritance.
How can they accomplish this?
Beneficiaries of the estate can file a formal refusal for this asset with the probate court prior to accepting ownership.
This means the disclaiming must be done prior to making any payments or using the timeshare.
Why?
These actions are interpreted as accepting ownership.
Some resorts offer a "deed-back" program to heirs.
The heirs must first contact the timeshare company to check if they are eligible.
The beneficiaries must then submit the required forms for relinquishing ownership.
Lastly, the heirs must pay final fees to exit the contract.
"Deed-backs" are not universally offered at all resorts.
Additionally, this option often requires payment of a fee for releasing ownership.
What can you do if the Resort refuses to take back the timeshare?
An estate planning or probate attorney may be able to help you find alternative legal options.
This could include reviewing the contract for loopholes, negotiating with the management company, or exploring other legal strategies to protect the estate from liability associated with the timeshare.
While families often believe they must accept an inherited timeshare, it can be possible to avoid this financial burden.
When the option is available, most heirs choose to avoid accepting a timeshare inheritance.
Some people may find they have the right conditions to make the asset beneficial.
It may be worth keeping if the family members love the location and frequently use the timeshare.
Other favorable factors include affordable fees compared to rental costs and greater flexibility in the contract for resale and usage.
Ultimately, these restrictions and long-term expenses should be thoroughly assessed.
When a timeshare is owned by you or a loved one, it must be addressed in estate planning.
Part of estate planning involves protecting heirs from inheriting a financial burden they cannot afford.
Working with an experienced estate planning attorney can help you navigate the decision of what to do with a timeshare.
The financial obligations of timeshares last a lifetime, and fees increase annually.
Payments must be made even if the property is unused.
Both the market and timeshare contracts make transferring or selling the property challenging.
When heirs accept a timeshare inheritance, they also take responsibility for all its fees and expenses.
If inheriting these ongoing expenses is not beneficial to the heirs, they can legally disclaim the asset prior to making payments or accepting ownership.
Because timeshares can be complicated, it is essential to look before you leap.
An experienced estate planning attorney may help you find trustworthy assistance to navigate available options.
This post is for informational purposes only and does not provide legal advice. You should contact an attorney for advice concerning any particular issue or problem. Nothing herein creates an attorney-client relationship between Harvest Law KC and the reader.
Reference: Yahoo Finance (Aug. 16, 2024) "Inheriting a timeshare can be bad news. Here's why, and how to avoid it"
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