If you and your family are fortunate enough to go on that well-deserved resort vacation this year, then there is a good chance you’ll find yourself listening to the all-too-familiar ‘timeshare marketing pitch.’ Most people are familiar with the concept of a timeshare, but there is more to it than meets the eye. The repercussions of owning a timeshare can vary tremendously depending on many things, including whether it is a real property interest, a mere right to use the property, or some other arrangement. Read on for more.
#1 – Timeshares are not Inherently Bad Investments. If a timeshare really interests you (and they are legitimate and worthwhile investments for many families), you can plan in advance to take ownership the right way and avoid legal traps and snares down the road. Most people do not realize the thicket of possible legal ramifications inevitable to owning one (or more). Timeshares are typically sold in a high-pressure environment, chock full of free food, gifts, and even vacations; these tools are all part of an intentional business model designed to encourage vacationers to make impulsive buying decisions.
#2 – Type of Ownership is Critical. If you own real property outside of Virginia and die without proper estate planning documents in place (no, a simple Will is not enough!) then the representative of your estate must appear in every state where such property is located. This means that even if you live in Virginia but you own a timeshare for one week in Florida, if it is considered “real property,” then the Florida courts must determine how it is disposed. Combine that inconvenience with the fact that each state has slightly different estate administration laws and the representative of your estate could have a messy complication on their hands.
If a timeshare is in the form of a deeded contract, it is considered ownership of real property. As you may know, real estate may be sold, rented, and gifted among other things. And as you may have guessed by now, also incident to ownership are real estate taxes and probate. Usually, taxes are included in the timeshare maintenance fee, but probate is another issue. If you die without a trust to dispose of your assets, then the court system will “probate” the Will, or follow the statutes of the state if there is no Will. In any event, dying without a trust and with real property can cause major headaches for your executor. Luckily this can all be avoided.
If the deed to your current or prospective timeshare is a “leasehold deed,” then it means ownership only lasts for a specified period of time. A “right to use” contract means what it sounds like – the purchaser acquires a right to use and enjoy the rights of the property owner (usually a resort). However, the pitfall of a “right to use” contract is the fact that it is possible for “other” benefits you may not care about, like a club membership, to be included. The “right to use” form of timeshare acquisition is used heavily overseas and in Mexico, because the ownership of foreign real property interests opens the door to many more legal issues.
#3 – You Do Not Have to Decide Then and There. Do not sign anything before you leave, unless you have a revocable living trust and have already met with your lawyer regarding the timeshare you are considering. The concept of a timeshare is attractive, but before saying “yes,” it is absolutely imperative to speak with a good estate planning attorney. For those who own timeshares already, it is still equally as important to not purchase another one until you have consulted an attorney, and also equally as important to talk to a good estate planning attorney if you own a timeshare but do not intend to purchase another.
Revocable Living Trusts Explained
Consult an Estate Planning Attorney Now!
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About Evan H Farr, CELA, CAP
