We were on a trip to a Marriott property in Mexico and we were offered a significant discount on our trip if we sat through a 90-minute timeshare presentation. As you would expect, they pitched it as a great financial opportunity to enjoy a vacation at a discount rate. Our sales rep even said that their timeshare can be inherited by our kids. A great way to pass a vacation home or something to our kids. That did make me start to think, is a timeshare a financial opportunity or hole that never ends.
A timeshare is an asset and potential liability of your estate. It can be inherited by your beneficiaries so you need to think it through. Do you envision your children enjoying future vacations at this timeshare like you do? Will they want to continue to pay the annual obligations that you sign up for?
The way timeshare work with when someone dies is that it typically becomes part of the estate, similar to other assets like a house or investments. This asset will pass like your other assets in your will (as you designate it).
Deeded Timeshares: These are treated like real property. Ownership is transferred via a deed, and upon the owner’s death, it usually goes through probate. During probate, the property is formally transferred to the designated heir(s) in a will, or according to state intestate laws if there’s no will.
Right-to-Use or Leased Timeshares: These are contractual agreements, more akin to a long-term lease or membership. While they don’t involve a deeded property interest, many still contain “perpetuity clauses.” These clauses stipulate that the contract continues indefinitely, meaning the obligations can be passed down to heirs.
Regardless of the type, the intent of many timeshare contracts is that the ownership, and its associated responsibilities, will continue beyond the original owner’s lifetime.
The asset is the time you are permitted to stay at the vacation spot or points that you acquire each year.
But there are ongoing financial obligations that come with a timeshare:
Annual Maintenance Fees: These are the most common and persistent costs. They cover the upkeep of the property, common areas, amenities, and sometimes utilities. These fees are mandatory, often increase annually, and must be paid whether or not the timeshare is used.
Special Assessments: Beyond regular maintenance fees, timeshare properties may incur unexpected costs for major renovations, repairs due to natural disasters, or significant upgrades. These are passed on to owners as special assessments, which can be substantial.
Loan Payments: If the original timeshare purchase was financed and there’s an outstanding loan balance, this debt may also transfer to the heirs. This can be a significant financial burden on top of the ongoing fees.
Property Taxes: For deeded timeshares, property taxes are another annual obligation that falls to the owner.
These financial obligations continue after your death along as part of the timeshare. Whoever inherits the timeshare will inherit the obligations along with its value
If the timeshare does not make sense to any of your family members, there is good news. No one needs to accept it!! The beneficiaries will have to refuse a timeshare through a legal process but there can be an end to the ongoing financial drain.
A key recommendation if your beneficiaries do not want to accept the timeshare is for them not to use it after your die. If they do, then that will be considered in whether or not they have accepted ownership.
Consult an Attorney: As always, consult an attorney to understand the legal complexities to help you understand your options and protect you from potential liabilities.
Conclusion
If you are considering purchasing a timeshare, you really need to understand the financial obligations that you and your family are undertaking. For example, when you die, the timeshare does not go away. Its value and obligations will continue after your death. Do your beneficiaries want to undertake the benefits and burdens associated with the timeshare?