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Personal Finance

What Happens to a Timeshare When the Owner Dies?

For many people, a timeshare represents an opportunity to live in the best of both worlds: a guaranteed spot in paradise with all the amenities and none of the hassle. It’s typically cheaper than purchasing a home or condo in a popular destination area, and responsibilities like maintenance are left to the property manager.

People who are interested in or are currently participating in a timeshare also find it can be a solid investment. Subletting or renting a timeshare can be lucrative – but not always.

How a Timeshare Works

Timeshares are based on the premise that plenty of people want to purchase access to beautiful vacation spots but simply don’t have the financial means to buy a home or condo in these locations. Timeshares allow people who enjoy returning to the same vacation spot the opportunity to buy that little piece of heaven without purchasing the whole lot.

As the name indicates, if you purchase a timeshare, you’ll be sharing “ownership” of a property with others. Each owner will get “custody” of the property during the time period dictated when purchasing the timeshare. For many, this is a 1/52 share, meaning you own access to the property one week a year.

For people who don’t want to buy into a yearly vacation, they can choose less frequent options, like a 1/104 (one week every other year), while others can choose more frequent or longer stays, like 1/12 (one month a year).

Timeshare Risks

Much like a home, timeshares can range in price, though the average price tends to hover around $20,000, according to the American Resort Development Association. However, the original price is far from the end of the payment story, which brings us to the risks.

Timeshare owners are typically required to pay an annual maintenance fee of, on average, around $880, according to Consumer Reports. However, much like the purchase price, this can vary drastically based on the property.

Additionally, and perhaps most troublesome to timeshare owners, are assessment fees. These fees can include resort upgrades, management or ownership changes or lapses, and weather-related damages and repair. In many cases, these are unanticipated and can be costly (thousands of dollars), particularly in the case of extreme weather damage from hurricanes, earthquakes, and volcanoes.

Toss in the price to travel to the destination of your choice, and it’s easy to see how the cost and responsibility can add up. Additionally, since it’s a property you purchased (like a mortgage), getting out of the agreement can be tricky. Even those who do find a way out of the agreement might find it difficult to recoup what was spent.

Of course, that’s not to say that timeshares are all bad. But what happens if you no longer want it, or what happens to a timeshare when the owner dies?

What Happens to Timeshares When You Die?

In addition to things like frequency and dates, timeshare agreements also typically include what is known as a perpetuity clause, meaning the timeshare will be valid for the lifespan of the original owner.

However, in the case of the owner’s death, a timeshare becomes part of the estate, and therefore, the obligations attached to it are passed onto the next-of-kin or the beneficiary of the estate. And depending on the fees and any existing payments, the timeshare can either be a welcomed gift or a financial nightmare.

If you inherited a timeshare, here are a few things you should (and should not) do:

  • Read the contract, immediately. It’s never easy to deal with the passing of a loved one, and worrying about financial and legal obligations is often the furthest thing from your mind. However, it’s important to understand the timeshare contract to avoid penalties or legal recourse that can happen for late fees or breach of contract.
  • Consult a lawyer. Timeshare contracts and inheritance laws are complicated and can vary state by state. You will need to understand the inheritance laws in your state and the state in which the timeshare is located. Also, you will need to have your lawyer look into any will or estate documentation. A lawyer can make this much easier and help you avoid costly mistakes.
  • Don’t stop making payments. If you’re the owner of the newly inherited property but are hoping to get rid of it, it might be tempting to stop paying. But fines and fees can quickly accrue, and some property management companies might start legal proceedings in as little as 60 days or less.
  • ​An inheritance can be declined (often through a disclaimer document). If you do not want ownership of the timeshare, you can choose to decline the inheritance, in which case it would go to the next-of-kin. If they deny it, then the property would likely be foreclosed on and any debt would be paid through estate assets, if available. In this case, the heirs would not suffer from credit damage typically associated with foreclosures.
  • Don’t wait. Though processes like probate (determining who legally owns the property after death) can take time, you should have an idea of what course you’re going to take as soon as possible to avoid compounding the issue.

Should You Transfer a Timeshare?

Transferring, or selling, a timeshare is often one of the first options considered, but is it always the best decision?

Transferring a timeshare can be a good idea if you don’t want to keep it and didn’t decline the inheritance. It’s also a good option if it can make you a little money (which is becoming increasingly rare) or take the property off your hands for little to no cost (which can be better than mounting fees).

If you’re planning on selling, it’s important to know it’s not as simple as selling a house. Instead, the contract could include specific stipulations about transferring. For example, it might be illegal for you to transfer the timeshare privately or without contacting the management company. As such, if you’re considering selling, the first step is to read the contract thoroughly to avoid any issues.

Once you are acquainted with the contract, your next step should be to consider a listing company that doesn’t require upfront fees to find out what, if any, value is associated with the timeshare. Then, contact the timeshare property to see if they can help sell the property.

Some companies, like hotels that offer timeshares, may be willing to sell the timeshare for you for a large commission, which might just make everyone happy.

As a closing note, because timeshares are a big business, be wary of third-party sellers that promise quick sales and demand upfront closing costs. Instead, contact the company and request a list of licensed brokers.

After death, a timeshare can quickly turn into an expensive burden. But if you carefully review both the contract and your options and seek legal counsel, you might be able to avoid long-term financial issues.