Florida is the home to over 350 timeshare resorts, each offering an atmosphere of luxury and comfort for vacationing. Florida has over 8 thousand miles of coastline, making it the perfect destination for a beach getaway.
A timeshare is a vacation property arrangement that lets a person share the property cost with others to guarantee time at the property. However, what is not mentioned are the ever-increasing maintenance fees and other incidental costs each year that can make owning one intolerable.
Legally, a timeshare is a form of fractional ownership in a property, typically in a resort or vacation destination. For example, if a person purchased one week at a timeshare condominium each year, they own a 1/52 part of that unit. Timeshares may be evidenced by a deed (a purchase of an ownership interest in the property) or just a contract (a leasing of the right to use the property).
Usually if one purchases a deeded timeshare, there is no expiration date. This means one is paying the maintenance fee indefinitely, even if the property is not used annually.
There are two basic types of timeshares: (1) the owner of the unit owns a piece of the real estate and (2) the owner of the unit has a lease or right to use the unit for the specified time. If a person owns a unit of a condominium for a week, then they own real estate.
When a timeshare property is owned by deed (deeded ownership), it is considered real property. As such, many real estate laws (though not all) apply to timeshare owners in the same way they are to homeowners. For instance, owners of deeded timeshares must pay property taxes on their vacation real estate. A timeshare estate is a parcel of real property under the laws of the state of Florida.
RTU timeshares are non-deeded and gives an individual the right to use a unit for a set amount of time. This means that, unlike a deeded timeshare contract, one does not actually own the property. The number of years each timeshare contract lasts depends on the resort and brand.
Having a deeded ownership means the subject timeshare is one’s property and have continuing obligations. One can enjoy it with family or friends, rent it out to other vacationers, and/or pass it down to relatives when done using it or after death.
When the owner dies, the timeshare becomes part of their estate. The inheritors of the timeshare become the new owners, and they are compelled to take over the timeshare fees.
Timeshares can pass by Will, Trust or Deed including a Ladybird deed.
In brief, one can refuse to inherit a timeshare. While the laws for rejecting an inherited timeshare can vary from state to state, the actual process will be the same and is widely known as Renunciation of Property.
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. Further, depending on the fees and any existing payments, the timeshare can either be a welcomed gift or a financial nightmare.
On average, it costs between 5 to 6 thousand dollars and takes about 12 to 18 months to get out of a timeshare contract using a timeshare exit company or attorney. However, the cost and the timeframe can vary depending on a number of factors including, how many contracts are attached to a timeshare.
Again, there are two distinct types of timeshare contracts one can purchase: a deeded ownership and a Right to Use timeshare. With a deeded timeshare, you own an actual fraction of the property through a deed. Right to use (RTU) gives a person the right to vacation at the property.
Once the owner of a timeshare dies, the timeshare is now subject to probate. Having a Last Will & Testament does not avoid probate, but rather, it instructs legally how the assets (such as the timeshare) should be distributed.
What does Fee Simple mean? Fee Simple is just another way of saying that a timeshare property is “deeded.” A deed is a legal document which provides the title to a timeshare property and grants official ownership rights. Fee Simple is regarded as the preferred type of vacation ownership.
Timeshare agreements usually contain a “perpetuity clause,” saying that the timeshare isvalid for the lifespan of the original owner. When the owner dies, the timeshare becomes part of their estate. The inheritors of the timeshare become the new owners, and they are obligated to take over the timeshare fees.
With approximately 10 million timeshare owners in the U.S. and annual revenues topping 10 billion dollars, vacation ownership is clearly an enormous business. Florida is one of the leading states in terms of the number of timeshares and the fact that several of the largest timeshare companies have their headquarters in the state.
For many timeshare owners, however, ineffective estate planning – or no estate planning at all – leaves their heirs with an expensive and aggravating mess figuring out what to do with the decedent’s timeshare when they pass. This is because owners often think of their timeshare as personal property, like a car or boat, instead of what it really is – deeded real estate.
For most timeshare developers, part of the sales pitch is that the owner can pass their ownership onto their children when they die, which is true. However, because it is legally considered real estate or real property, the only way ownership can transfer from one person to another is via a deed or court order (i.e., probate).
Consequently, what happens when a timeshare owner dies without addressing their ownership in their estate planning? Like many timeshares, it ends up in probate. The probate process is not only expensive and time-consuming, but it also means creditors see it as an asset and can pursue it to settle any debts against the estate.
Furthermore, in Florida, any probate administration involving a Florida-based timeshare must take place in Florida, regardless of where the owner or the heirs live. That can add even more complexity, more aggravation, and more expense to the process. And while there are ways to legally refuse or disclaim an inherited timeshare, that procedure is also a complicated, paperwork laden process, which will require the assistance of an estate planning attorney.
Instead, a more effective course of action is to avoid probate entirely and include one’s timeshare interest in their estate planning, treating it like the deeded real estate that it is. This can be carried out in one of several ways:
- Distribution through a trust. With a living or inter vivos trust, one can transfer assets into the trust and continue to have access to them. The assets are then distributed directly to one’s beneficiaries after death, bypassing probate entirely. By placing one’s deeded timeshare into a trust, ownership will go to their heirs without having to hire an attorney and go through a probate court proceeding.
- Adding heirs through a deed transfer. By having the names of one’s heirs added to the timeshare deed, they become co-owners by right of survivorship or as a type of designated beneficiary known as remaindermen. That means, when one dies, full ownership automatically transfers to the survivors. One may even want to transfer the deed entirely to their heirs prior to death. However, that will make them legally responsible for the maintenance payments and property taxes sooner than later.
Either of these options will effectively eliminate a great deal of frustration and legal expense for the heirs. Unfortunately, most timeshare owners are not aware of this issue and the property ends up going through probate. When that happens, the timeshare often does not seem worthy of the time and expense involved with the probate administration. Conversely, including it in one’s estate planning will allow the heirs to continue enjoying the travel benefits as part of deceased’s legacy.
If you have questions about how to keep a timeshare out of probate or would simply like to discuss related issues with a qualified estate planning and/or real estate attorney or how to protect your family and assets, contact the office of CASERTA & SPIRITI for a consultation.