Estate Planning for Timeshare Owners

Understanding Timeshare Ownership

To engage in any timeshare estate planning, you first must understand the different ways that a timeshare can be owned. There are two different kinds of timeshare ownership: contract and deeded.

A contract grants the owner use of the property for specific periods of time periods or grants the owner a certain number of points that the owner can use to purchase vacation time at the property. Contract ownership can continue after you die or it can terminate at your death. This varies from contract to contract. With contract ownership, there are often fees that your estate will be obligated to pay until the estate can either give the property back or sell the property (if allowed). Often, the estate often must pay fees to either give the property back or sell, meaning that the timeshare is more of an obligation than an asset for your beneficiaries.

A deed grants a real property interest in the timeshare. This means that your will determines who gets the timeshare (assuming that the timeshare is in your name). You can also deed the timeshare into trust to avoid the probate process. Alternatively, you can use a lady bird deed to transfer your timeshare to your beneficiaries automatically at death. However, even when owned by deed, a timeshare often comes with significant expenses.

Estate Planning Options for a Timeshare

There are a number of estate planning options for timeshare owners. Each comes with both advantages and disadvantages.

Do Nothing

The simplest estate plan is to just leave things as they are. This option is fine if you own the timeshare by contract and that contract terminates at your death. If you are in that situation, then no estate planning needs to be done other than informing your loved ones that the timeshare will no longer be available after you pass away.

However, if you own the estate plan by deed or if your contract does not terminate at death, then doing nothing will result in your estate dealing with the timeshare. Often this means your estate will pay the fees associated, and if your beneficiaries decide that they do not want the timeshare, they may need to pay to get rid of it. Alternatively, if your beneficiaries decide that they do want the timeshare, it will need to go through the probate process. Doing nothing is easy now, but it often leads to a headache for your loved ones after you pass away.

Sell the Timeshare

If your loved ones are not interested in inheriting the timeshare from you, your best court of action is probably to sell the timeshare, assuming you are allowed to do so. However, you should manage your expectations when it comes to the purchase price. Timeshares are often sold at a loss because they simply are not in high demand. Think about it this way: if a company has to literally pay people to sit through a sales pitch for a timeshare, then there are probably not a lot of people actively seeking timeshare ownership. Still, selling at a loss is far better than leaving a burden for your children.  

Abandon the Property

This option applies only to contract owners of timeshare property. If you abandon the timeshare, you give the property back to the timeshare management company. You might think that they will pay you to get the property back, but the opposite is usually true. Timeshare management companies often require you to pay them to have them take the property back, as they now must absorb the expense of reselling it to another buyer.

Put Your Timeshare in a Trust

This and all remaining options apply only to deeded timeshares. If you have a deed to your timeshare, then you are typically free to convey the property. This means that you can deed the property into a living revocable trust to avoid the probate process. In other words, you can arrange things so that your trust is the owner of the property. The property then will pass to your loved ones according to the terms of that trust. This option has the advantage of avoiding probate, and it can be useful if your children want to keep the timeshare after you pass away.

Create a Tenancy by the Entirety

A tenancy by the entirety is a form of ownership only available to married couples. One of the advantages of owning property as tenants by the entirety is that when one spouses dies, the property transfers automatically to the other spouse. This is done without any involvement from a probate court are judicial approval. Thus, for married couples, this can a great estate planning option.

Create a Joint Tenancy with Right of Survivorship

Joint tenancy with right of survivorship allows for joint ownership of property, similar to a tenancy by the entirety. Also similar to a tenancy by the entirety is the fact that when one joint owner dies, the property automatically transfers to the remaining joint owner (or owners). However, you do not have to be married to set up a joint tenancy. This form of property ownership can be useful for unmarried couples, parents who want to leave property to a child, or anyone else who wants shared ownership of property.

Use a Life Estate or Lady Bird Deed

A life estate deed allows you to keep the timeshare during your life but have the property automatically transfer to somebody else at death. Often the property will transfer to a child of the property owner. A lady bird deed is a kind of life estate deed that has the added benefit of allowing you to sell the property to someone else without the input or consent of the person who would otherwise receive the property at death. Both of these deed types can be used in place of or in conjunction with a living trust.

Bottom Line

Timeshares present a unique estate planning difficulty. To plan properly, you have to first understand how you own the timeshare. You then have to determine whether your loved ones want to inherit the timeshare at all. If they do, then it’s often best to speak with an estate planning attorney about which options are the best fit for your situation.