In facing the grief of losing a parent, it's evident that ridding yourself of an unwanted, inherited timeshare will be the last thing that crosses your mind as a beneficiary. However, it's vital to address these unwanted inheritance "gifts" before your parents' death. If not, you may have to deal directly with the timeshare resort developer or go through the probate process, neither of which is often easy.
Needless to say, estate planning, including the handling of timeshares in perpetuity, should be addressed before the original owner's death. There are a few ways to avoid directly inheriting such real estate from your parents if you do not plan to use it. You might also have options as an heir to get rid of their timeshare if it is already passed down to you.
The following guide will discuss the key aspects of how to not inherit your parents' timeshare, including the legal, financial, and tax implications of doing so, along with offering the best tips on how to manage a timeshare in perpetuity.
Suppose you are still not familiar with what precisely a timeshare is (which is perfectly understandable given the nature of the timeshare industry). In that case, a brief explanation is this: a timeshare is a split-owner, "right to use" vacation property ownership that is managed and outright owned by a resort or a property management company.
It is utilized annually (usually one week per year) between owners who buy into the ownership option. Costs are charged monthly in the form of a "mortgage," but additional expenses, known as timeshare maintenance fees, are assessed annually to each unit owner. These charges may not cover other assessment costs, such as in the event of a natural disaster or another "unforeseen" event. Many timeshare agreements are written in perpetuity, meaning the owner is responsible for it forever unless they sell or gift the timeshare away.
An inherited timeshare, specifically, is a timeshare that has been passed down from one generation to the next. It can be a great way to enjoy vacation property without purchasing it outright. However, understanding the ways in which an inherited timeshare works can be complicated and confusing.
Timeshares have been a popular form of vacation property ownership since the late 1960s. In the beginning, there was just one type of timeshare to buy - the fixed-week timeshare, where each buyer owns the right to use the property during their specified week of every year. This traditional timeshare agreement is considered a deeded timeshare and still remains the most popular type available today. Alas, deeded timeshare agreements are often in perpetuity, meaning the ownership will last for the remainder of the buyer's life.
Since the inception of the timeshare industry, several other different types of timeshares have been introduced. The counterpart of the fixed-week type is the floating-week timeshare, which allows owners to still visit the same property each year but changes the week with each visit. An even newer timeshare model is the points-based system that gives owners more flexibility, now with the ability to choose different locations and weeks. From traditional timeshares to fractional ownership and points-based systems, there are various types of timeshares to be aware of in the event one gets passed down to you.
Before inheriting a timeshare, it is important to consider the costs associated with owning the timeshare, including any annual fees, taxes, and rental or maintenance fees. Additionally, it is important to consider the length of the timeshare contract and any restrictions that may be placed on the use of the timeshare.
When a timeshare is inherited, the legal implications can be complex. In most cases, the timeshare will be transferred to the inheritor as a gift. Depending on the state, the inheritor may be responsible for any taxes due on the transfer. The inheritor may also need to sign documents that transfer the title and other ownership documents to their name. It is important to understand the specific legal requirements of the state in which the timeshare was purchased, as well as any other applicable state and federal laws that may apply.
Yes, a few legal requirements must be followed when inheriting a timeshare. Depending on the state, the new owner may need to file paperwork with the county recorder, obtain a new deed, or sign a transfer agreement to take ownership of the timeshare.
Inheriting a timeshare can be a great financial opportunity. However, it is important to understand the associated expenses of owning a timeshare. Depending on the type of timeshare, there may be upfront costs such as closing, transfer, and maintenance fees. There may also be ongoing costs such as annual assessments, special assessments, and other fees. It is important to understand all of the associated costs before making any decisions about an inherited timeshare.
The fees associated with an inherited timeshare may vary depending on the type but typically include annual fees, taxes, and any rental or maintenance fees the new owner is responsible for paying.
Inheriting a timeshare can also have tax implications. Depending on the type of timeshare and the value of the timeshare, the inheritor may be responsible for paying taxes on the gift. It is important to understand the tax implications of the inheritance before making any decisions.
Putting the children's names on the timeshare disclaimer document could force them into being beneficiaries. They'd then be held responsible for the ongoing costs upon their parent's death, such as annual maintenance fees, owed interest on the timeshare mortgage loan, and other associated timeshare fees they likely didn't ask for. If they remain uninterested in using the timeshare and fail to pay, they risk credit damage to themselves.
An owner should also pay from their bank account or credit card. As heirs, you shouldn't give the timeshare resort company any of your bank account information, as this could be an additional avenue to collect payment from the timeshare company.
As the estate's heir, you hold the right of refusal when inheriting property after death. A timeshare ownership inheritance is no different; you can outright refuse it with the help of an estate planning attorney.
Like handling any other estate asset, it's best to put everything in writing. Depending on the type of timeshare (usually a "right to use" timeshare), you will send a written letter of renunciation to the appointed executor of the estate or legal counsel, along with the timeshare resort company. You must send the letter within a specific time frame after the owner's death (dependent on your state's particular laws), and will likely need to include a copy of their death certificate.
That should fully absolve the beneficiary of any responsibilities with the vacation ownership. Consult with a qualified estate attorney in your area for the proper way to handle an unused timeshare inheritance.
After inheriting a timeshare, the first step is to obtain a new deed or transfer agreement to take legal ownership of the timeshare. Then, the owner should familiarize themselves with the terms and conditions of the timeshare contract and the costs associated with owning the timeshare. Finally, the owner should consider their options for using the timeshare, including renting it out or exchanging it for another vacation destination.
When an inheritor takes possession of a timeshare, it is important to understand how to manage it. This includes understanding the management fees and costs associated with the timeshare, as well as understanding the rules and regulations that govern the timeshare. It is also important to understand the resale options that are available for an inherited timeshare.
Many timeshares can be rented or subleased to third parties. This can be a great way to generate income from an inherited timeshare. However, it is important to understand the rules and regulations that govern renting or subleasing a timeshare before engaging in any rental activities.
Many timeshares can be exchanged through a timeshare exchange program. This allows the inheritor to exchange their timeshare for a different timeshare at a different location. Understanding the rules and regulations of timeshare exchange programs is important before engaging in any exchange activities.
An inherited timeshare can also be transferred to another person or entity. Depending on the terms of the timeshare, the inheritor may be able to transfer the timeshare without any additional costs. Understanding the rules and regulations of timeshare transfers is important before engaging in any transfer activities.
In some cases, the inheritor of a timeshare may wish to terminate their ownership. Depending on the timeshare's terms (e.g., perpetuity clause), options may be available to terminate the timeshare. Understanding the rules and regulations of timeshare termination is important before engaging in any termination activities. Inherited timeshares can be a great way to enjoy vacation property without purchasing it outright. However, understanding the legal, financial, and tax implications, as well as the different types of timeshares and the best ways to manage, rent, exchange, or terminate an inherited timeshare, is critical before making any decisions. By understanding the key aspects of timeshares, an inheritor can make informed decisions about managing their inherited timeshare.
While a timeshare may have brought the parents memorable family vacations, that doesn't mean it will do the same for their children. It could, in fact, become a huge burden for them to carry on their shoulders as a result. Although timeshare agreements can be binding, there are ways to ensure that they're not passed down through proper estate planning and open communication between parents and children.
If you feel that your parents are planning to designate you or your siblings as heirs to timeshares, it's best to express your concerns or raise any questions about timeshares you may have with them before their death. The inheritance of unwanted timeshares in perpetuity will undoubtedly be problematic once you deal with it firsthand.
For questions about the timeshare termination services of Wesley Financial Group, LLC* and whether they can be of service to you, click here.
