What Happens to my Timeshare

What Happens to my Timeshare?

I had lunch the other day with a client – nice Italian meal – and we were talking about life so naturally vacations came up.  This client happens to own a timeshare in St. Thomas and was talking about taking a trip down there sometime soon.   As he was talking about it I realized that I had never thought about the estate planning issues around a timeshare.  In other words, what happens to a timeshare when you pass away? 

Joint ownership

The easy answer for most people that own a timeshare – couples – is that at the death of the first spouse it merely passes directly to the surviving spouse (who is typically the joint owner).  If the surviving spouse re-titles the house and splits the ownership with a child or sibling then the joint ownership nature remains and at the death of the first of the two the property passes to the second owner.  Repeat the process as long as the property is owned by two people (as long as it is not owned as Tenants in Common). 

Individually owned property

For individually owned property, it is not as simple.  Individually owned timeshares depend on what type of timeshare it is: deeded property or “right to use” property. 

      

      a.       Deeded property is the most common form of timeshare ownership in the US.  Having a deeded timeshare means that you have a deed that gives you full ownership rights to your parcel of the property.  This means that the clerk’s office in the county of the timeshare will have a record of your ownership. 

      

      b.      Right to Use property does not come with any ownership rights – meaning that you can’t pass it on to your heirs.  It typically expires after a certain number of years or with at your death. 

In other words, if you own a deeded property your heirs have to be concerned with the estate settlement of a timeshare but if you own a right to use timeshare then they don’t.  If you don’t know what type of timeshare you own, you should be able to determine it by looking at your contract.  If you can’t find your contract then you should be able to call the management company and ask. 

Deeded property

A deeded property is how we own our homes.  With a deeded property, you own physical property in the state, territory, or country where the timeshare is located. 

Therefore, when you die and there is no joint owner in the property it passes through probate according to the terms of your will.  Alternatively, if you have placed the property in your revocable living trust the property will avoid probate and pass according to the terms of your revocable living trust (if it is property in a foreign country or US territory you will have to check whether or not they recognize US trusts ). 

So the preferable method of timeshare ownership is clearly joint ownership or owning it through a revocable living trust.  Of the two, the revocable living trust is the preferred method because it is more permanent in nature. 

Problems

The challenge that I see is that passing a timeshare through probate can be an expensive process.  At a minimum you are likely talking about $1,000 to $1,500 in US.  However, if it is owned internationally you could be looking at a cost of as much as $3,000 to $5,000, potentially more.  Considering that the actual value of most time shares is less than $50,000 we are talking about a rather large cost to transfer ownership.

Conclusion

If you happen to own an international timeshare or one in a US territory, it becomes even more complicated because now your estate has to be settled in a foreign court.  I am not an attorney or an international law expert, but I do know that passing property through their courts system can be challenging and time consuming – both attributing to the higher estimated costs for timeshares owned internationally. 

What does this mean?  If you have a timeshare you need to figure out how it is owned (“right to use” or deeded property).  Once you know how it is owned you should talk with an estate attorney about the best way to structure your estate documents to pass the property at your death.   It may be that the cost of setting up a revocable living trust is similar to passing the property through probate at which you could determine that it is just as well to let you heirs deal with it.  Or you may realize that the headache and costs of the probate process isn’t necessary for your heirs so you take the steps on the front-end to reduce the costs and headache.  Either way, it is good to understand the costs and the options for making things pass as smoothly as possible.