Timeshare owners James and Barbara Ruh are enjoying their annual Hawaii vacation, but they don’t want their daughters to be forced to take over the contracts when they die. So the Ruhs, who are attorneys with offices in Santa Barbara, California, and Edwards, Colorado, created a trust to hold their timeshare interests.
The girls, who are co-trustees with their parents, can keep the timeshares, sell them or give them up after the parents die, says Barbara Ruh. The trust is designed to prevent the developer of the timeshare complex from going after their daughters for unpaid or ongoing costs.
“If our daughters don’t want timeshare, they won’t be individually responsible for any fees,” Ruh said.
Timeshare experts say there is usually no need to create a trust, with the hassle and expense that comes with it, to avoid inheriting vacation ownership from a parent. Families have a variety of options to make sure no one gets a bond they don’t want.
For those who don’t know, timeshares are a way to use vacation property for a week every year. Traditionally, timeshares included a real estate deed, but now they are typically sold as a ‘right to use’ contract “more like a gym membership,” says timeshares attorney Michael Finn of Largo, Fla. .
In addition to the initial cost of purchase, homeowners must pay an annual maintenance fee, which currently averages around $ 900, but can total $ 3,000 or more for high-end properties. Homeowners may also face special assessments to cover repairs or damage caused by natural disasters.
Since timeshare contracts typically include “in perpetuity” clauses, owners may be required to pay these fees for life – and the obligation to pay passes to whoever inherits the contracts upon the owner’s death.
The good news: no one has to inherit an unwanted timeshare.
“Timeshare companies sometimes claim that they will hunt offspring and heirs for debt, [but] I have never heard even a single anecdotal story of this event, ”said Jeff Weir, chief correspondent of RedWeek, a timeshare rental and resale site.
Here are three important things to know:
1. Timeshares don’t have to be for life
While it is clear that neither of the children want the timeshare, the owners can sell or assign their interest before the death, assuming any funding used to buy it has been repaid. (See my previous column, “How to get rid of a timeshare. ”)
In some cases, owners too fragile or too poor to travel have managed to simply ask the resort to take back their timeshares, says Brian Rogers, owner of Group of timeshare users, a forum for timeshare owners. If the resort refuses, the owner can give up the timeshare, although this can lead to collection actions and damage to the owner’s credit. Resorts are unlikely to sue older customers for abandoned and paid timeshares, Rogers says, and many older owners don’t care what happens to their credit anyway.
2. The names of the children should not appear on the document.
Timeshare sellers can encourage the inclusion of the names of heirs on the deed as a “convenience” to make it easier for an owner’s children to use the property on their own, Finn says. What it actually does is trick the kids into inheriting the timeshare. Parents who fell into this gamble can ask the resort developer to remove these names from the act, and the developer will likely comply if there is no outstanding loan against the timeshare, says. he. Another tip: children should never pay the maintenance costs directly, even if they take care of the rest of the parents’ finances. These charges should always come from the parent’s bank account, Finn says.
3. The heirs can renounce the timeshare
If the timeshare is of the “right to use” type, the heirs must order the executor to notify the resort that the owner is deceased, so the resort can take action to repossess the timeshare, Finn said.
If the timeshare has a real estate deed or there is a specific bequest in the owner’s will – “I’m giving my timeshare to my daughters Sally and Simone”, for example – Finn recommends that heirs file a written release of interest with the inheritance court which deals with their parents’ inheritance.
“You let everyone know, ‘I have no or want no interest in this property. If I’ve ever had one, I’m relinquishing any interest now, ”Finn said.
This article was written by NerdWallet and was originally published by The Associated Press.