What To Do With A Timeshare Some Options
Written by Craig Wisnom
Posted on May 30, 2017
Own a timeshare? If you’re funding a revocable trust or otherwise establishing your estate plan, you should be aware of the extra effort needed to effectively deal with that timeshare. The work involved may be a lot more than you’d think, given the value of the asset.
Most timeshares are structured as Shared Deeded Ownership, where the owner actually owns an underlying portion of the property, typically as an undivided interest. Regardless of whether the owner also holds some personal property interests separate from the land, any transfer of the timeshare must involve a valid real estate transfer like any other piece of real estate.
Therefore, if an owner is funding a revocable trust, at the very least a legally appropriate deed must be prepared from the owner to the revocable trust. If you live in Arizona, but the timeshare involves a deeded interest in another state, you’re going to need an attorney in that state to properly prepare the deed, just as you would if you were transferring a full piece of real estate. The fees are usually the same whether you are transferring a $20,000 timeshare versus a $400,000 vacation home. Even though the timeshare company may have drafted and recorded the deed when they sold it to you, they will generally not assist you in making transfers to a revocable trust.
Why spend the extra money and effort to get the time share deeded into a revocable trust? Because the complexities of dealing with such interests at death, assuming the beneficiaries want the property, can be much worse! As a real estate interest, no matter the value, some form of a probate proceeding is typically required at death if the property is not in a revocable trust or the subject of some other deeded mechanism to avoid probate, such as right of survivorship or beneficiary deed.
This is much different than personal property. If you die with everything you own in a revocable trust, except a $15,000 bank account, Arizona law allows a simple mechanism to collect the account, which is personal property, without any court probate proceeding. If, on the other hand, you die with everything you own in a revocable trust, except a $15,000 timeshare interest in real estate, a probate proceeding must be filed in court to collect that asset. There is a simplified procedure for real estate under $100,000 in value, but unlike the bank account, it still requires a court filing, and you must wait 6 months to take the “simplified” route.
Keep in mind: Probates in other states tend to be more complex and expensive than in Arizona.
If a timeshare does not involve any underlying real estate interest but is merely a membership or personal property interest, you should check with the company to determine what needs to be done to transfer that interest to the revocable trust.
If you have a timeshare, you are well aware of the ongoing annual maintenance fees that accompany the property. After death, if the beneficiaries don’t want the property and the attendant obligations, they may consider reselling it to the company or using a third party broker. However, getting any money out of it through a sale may be unrealistic.
To this end, planning what you do with the timeshare may depend on whether your beneficiaries will really want the interest, or everyone will be glad to be rid of it. If the former, all the planning to get the timeshare in a revocable trust is important. But if it appears that your children won’t want the timeshare, it may not be worth transferring it into the Trust. After death, your children may be able to abandon the timeshare by taking certain legal action to put the property back in the timeshare company. Of course, consulting with your attorney on the best way to do this to avoid fees and penalties will be critical.
Whatever you decide to do, understanding the legal issues involved with a timeshare and your estate plan will reduce future costs and problems.