One of the more common inquiries that the Ask ROC! Consumer Helpline receives, is from timeshare owners with estate planning questions. Often they have enjoyed their timeshares for many many years and are now getting to a point in their lives when they want to start thinking about what to do with it when they are no longer around to use it. They may have heard from someone, or read somewhere that their offspring and heirs would be obligated by law to take ownership of it, along with the financial obligations of ownership. This mistaken belief typically results in a timeshare owner making the decision to try and get out of their timeshare many years before they are done traveling and making memories. Or even worse, becoming the victim of a scam company that is pushing this false narrative with hopes that owners will pay them money to help them exit their timeshares.
We thought it was time to set the record straight, and solicited the help of Kurt Gruber of the law firm BakerHostetler to answer a few of the common questions. Mr. Gruber is a 30-year law professional specializing in real estate and hospitality law, with a concentration on the shared ownership and vacation industries.
Question 1: What happens to my timeshare when I pass away?
The majority of timeshare products are structured in such a way that they are assets that may be owned in perpetuity (or at least until the timeshare plan terminates). If you still own your timeshare at the time of your death, then ownership would pass to your heirs (if you don’t have a will) or to your devisees (if you do have a will). It is generally advisable to have a will to direct the disposition of your assets and in that document you may designate who will receive your timeshare. If you do not have a will, or if you do have a will but do not designate a specific recipient for your timeshare, then generally the laws in your state of residence or of the state where the timeshare is located, will determine who gets your timeshare.
Question 2: What happens if my heirs don’t want it?
An heir or devisee that is designated to inherit your timeshare can file a disclaimer of interest to legally prevent inheriting the timeshare. State laws will dictate the amount of time your heir has to file this disclaimer. It is also advisable for the executor of your estate to notify your resort operator and the holder of any mortgage of your death, to prevent the accumulation of delinquency costs. In order for the disclaimer to be effective, it is important to emphasize that the disclaiming heir should not act in any way inconsistent with their intent to disclaim the timeshare, e.g. by using the timeshare or letting anyone else use the timeshare after the your death.
Question 3: What if I stop making payments? Will it affect my credit?
First, it’s almost certain that you will no longer be able to use or exchange your timeshare after you stop making payments. A resort will generally not allow an owner to check-in or exchange the use rights if there is any balance on the account. Next, the amount you owe may quickly grow as late fees, interest, and collection costs are added to the outstanding balance. This could greatly increase the cost of satisfying the debt if you decide you want to continue using your timeshare.
If you no longer wish to own your timeshare, nonpayment of your mortgage or maintenance fees could result in negative reporting to the credit agencies and harm your credit rating. This will largely depend on whether your timeshare is paid off and the debt is maintenance fee debt owed to your resort operator, or if the debt is mortgage debt that is often owed to a 3rd party. The latter is much more likely to affect your credit. Your ownership often will continue until such time a foreclosure action is completed and the timeshare is recovered by your creditor through legal means. This can cause further damage to your credit.
We are very appreciative of Kurt Gruber’s insight to help set the record straight on some common timeshare estate planning questions. For owners who are contemplating exit, ARDA-ROC recommends owners always contact their timeshare developer, resort management company or HOA as their first source of information regarding exit options. For more information on how to safely explore exit options, visit www.responsibleexit.com.