An estate comprises everything an individual owns – the cars, homes, savings account tucked away for a rainy day, and even the little souvenirs obtained on vacation. When it comes time to plan for how to pass all of your worldly goods on to your loved ones, it can be difficult to keep track of all of the various assets that need to be considered.
One frequently overlooked, but often important asset is any timeshares that may be in your name. Those timeshares may bring back wonderful family memories, or stand as a place where your family can go to gather and honor you. Or they may simply be a good place for a vacation. Either way, they are assets worth incorporating into your estate planning.
Timeshares can take two different forms. If they are real property, then the asset that must be conveyed is the deed to the property. This will typically require you to hire an attorney in the jurisdiction where the timeshare is located.
While this may seem unnecessarily expensive and complicated, it is the general rule in most states (including Texas) that real property must go through probate in the state where it is located. Thus, for instance, if you have a vacation timeshare in Nevada that was deeded to you, that property must be transferred through a Nevada proceeding.
In other cases, your timeshare may be a contractual right to use certain property during a specified time throughout the year. This contractual interest does not require you to undertake any out-of-state proceedings and can be handled by a Texas estate planning attorney.
One of the easiest ways to ensure a stress-free transfer of your timeshare to another family member upon death is to create an irrevocable living trust and place the timeshare in the trust. While the trust will become the owner of the timeshare, you can retain the right to use the timeshare as you please as a beneficiary of the trust.
In addition to designating yourself as a beneficiary of the trust, you can also designate a death beneficiary, or someone who will become the beneficiary of the trust upon death. This means that, upon your death, the trust will simply continue to be the owner of the timeshare and will not need to go through probate. However, your death beneficiary will be able to utilize the timeshare as the new beneficiary of the trust.
The additional advantage of placing your timeshare in a trust is that it allows the trust to continue to handle the maintenance of the timeshare during any years that you may be unable to use it, after your death, and during any estate transition periods.
Most timeshare operations charge their users a regular management fee in exchange for access to property. In order to retain the timeshare, you must continue to pay this management fee. A trust ensures this continuity of payment because it is the ongoing owner of the timeshare, rather than the changing beneficiaries.
A trust also helps any future owners of the timeshare because it insulates them from being burdened with these management fees. Because the management fees do not end upon death, if the timeshare is transferred to a new family member or friend through probate, that individual will become responsible for paying the fees. This can be a significant burden to impose on your loved ones.
While you may be planning to pass along your timeshare to your loved ones in the hopes that they will enjoy it as a new vacation spot, or continue to make memories there in your absence, this is not always the case. The reality is that although gifts are given with the best of intentions, they are not always what the beneficiary hopes to receive.
Whether your family members are simply too busy to make use of the timeshare, aren’t interested in the location, or feel that they, or the trust, are squandering away money in the payment of management fees, they may eventually want to get rid of the timeshare in the trust.
But this can be a difficult endeavor. Timeshare companies make their money off the fees they receive from timeshares, and they are often reluctant to take back the property that has been given.
It is important that you keep good documentation related to the timeshare and ensure that that documentation is provided to future beneficiaries. They may then attempt to contact the timeshare and negotiate a return of the property. While they will rarely receive any money in exchange, they can avoid the payment of future fees.
If the timeshare company is not initially amenable to taking back the timeshare, the trust and beneficiaries may make the decision to stop paying the management fees. This will initially result in collection letters and demands from the management company, which is never pleasant. But it will also likely bring them back to the table to reconsider returning the property, so that they can sell it to another buyer.
Also, as long as the timeshare is properly held in a trust, these collection demands will be made against the trust, rather than any particular individual beneficiary. Therefore, this approach won’t risk the possibility of credit hassles for your family members.
In estate planning, there are two important goals: (1) helping your assets to get to the people that you want to receive them, and (2) making sure this occurs in the most expeditious and hassle-free manner possible. When dealing with unique items like timeshares, it is often worth speaking with an attorney to brainstorm the best ways to meet these goals.
At Romano & Sumner, LLC, our estate planning attorneys are available to discuss timeshare issues with you and answer any other questions that you may have. We pride ourselves on serving Sugar Land, Houston, and the surrounding areas. For more information, contact us online or at 281-242-0995.
Romano & Sumner, PLLC