Passing on Your Timeshare Without Problems:

Many timeshare owners will consider, at some point, that they want their children or family members to have their timeshare when they die. Many, if not most, timeshares are real property interests. How you hold title to your property affects how title is transferred upon your death. Most property owners want to help their children avoid the cost and delays of Probate proceedings after they die. Probate is the court process to determine the new owners of property after an owner's death.

Having a will does not avoid probate; it only directs the probate court how to distribute your assets. Probate proceedings can tie-up your property for up to a year or longer and can cost your estate thousands of dollars in probate costs and attorneys fees. Often the heirs cannot use the timeshare until the probate is completed; yet the maintenance fees must still be paid. Advance planning can save money and allow for a smooth transfer of title to accomplish your estate planning goals.

If two owners, such as husband and wife, own the timeshare as "Joint Tenants" or as "Tenants by the Entirety," probate is avoided when one owner dies because the co-owner has automatic "rights of survivorship" and becomes the sole owner. This can defer probate, but not avoid it; when the surviving co-owner or sole owner dies, probate then becomes necessary.

Some timeshare owners avoid probate for the timeshare by conveying the timeshare to the children while the owner is still alive, or by adding children as joint title holders. Is this the wise choice for you?

Any estate planning option has positive and negative aspects which need to be considered. A good plan for one family is not the best choice for another. Before a decision is made, it is wise for a timeshare owner to consult with his or her estate planning attorney and to read some books or articles about estate planning.

Adding children on title so that all owners are Joint Tenants can avoid probate and is a good option for some owners. Of course, only adult children should be added on title to the timeshare. A minor child cannot sign legal documents if the timeshare needs to be re-transferred or sold.

There can be some drawbacks with this option; for example: a) the owner loses the freedom of independent control of, and planning for, the timeshare; co-owners will have to agree on sharing the timeshare, whether each year to bank it or exchange it, who's turn it is to pay annual fees, etc. b) There can be exposure to possible creditor claims against the joint tenant. For example, if a son who is on title loses his job and can't pay his debts, his interest in the timeshare is an asset subject to judgment liens; c) if a daughter who is on title gets divorced, the timeshare is a property interest to be considered in the divorce action; d) the gift of the timeshare to the added owners is final (if it is time to sell or change ownership to the timeshare, all owners have to be available and agree to sign the necessary papers).

As one can imagine, having additional owners on title can create unanticipated problems. Arguments or bad feelings can result when co-owners can't agree on use weeks or cost sharing due to changed circumstances such as busy work schedules, loss of work, being tied to young children's school or athletic commitments, etc. Some adult children cannot make good use of a timeshare due to their current circumstances and don't want the responsibility or regular expense. The children should be consulted prior to deciding whether to add them on title.

Many people are now using revocable living trusts for estate planning purposes, probate avoidance and/or tax benefits. The problems of adding adult children on title to the timeshare are avoided with a trust.

Some of the advantages of creating a revocable living trust and conveying the timeshare (and other property) into the trust are:

• You retain full control; the owner is usually the initial trustee of the trust. Theowner retains control over the property, can amend or revoke the trust agreement, and can sell or transfer the timeshare and other property in the trust, as circumstances require. There is no need to consult with the children or to obtain their signatures in order to schedule, bank, exchange or transfer the week(s).
• When you set up a trust, your various properties are conveyed into the trust. As your estate plan needs change, all that often needs to be modified is one document, the trust document, to amend the trust distribution to redirect future distribution or investment of various properties, etc. As trustee, you don't need the children's signatures or cooperation to make changes to your estate plan. For example, a simple amendment to the trust can direct that John and Mary, instead of Tom and Sue, are to receive title to the Hawaii timeshare when both mom and dad pass away.
• Having all you timeshare weeks in your name as trustee of your trust avoids a problem owners sometimes encounter when using exchange companies. Some exchange companies require and bill for two separate accounts if the names of the owners on two timeshare weeks are not the same; e.g. if John and Mary Jones add son Bob as a co-owner on one week, and then add daughter Sue as a co-owner on their second week, the exchange company may require two accounts (and double costs), for an exchange of both weeks.
• With a trust, when you die, your successor trustee can manage and distribute the trust property as you have instructed, without many of the costs or delays of probate.
• Your trust can also arrange for the timeshare and other property to be held in the trust for a period of years after you die, until your children or beneficiaries become adults or are more mature. A trust can also be used to plan for use of your estate to provide for the care and special needs of a disabled spouse, child or grandchild.
• Your trust can avoid the need of a court appointed guardian to manage your property should you become incapacitated.
• For married couples with larger estates, properly prepared revocable living trusts can save tens of thousands of dollars in their combined federal estate taxes.

A revocable living trust is usually created to handle all of a persons property, not just the timeshare(s). Establishing a trust is more complex and involved than preparing a will. Therefore, the costs to develop an estate plan using a trust will be greater than just having a will. However, usually the initial costs are offset by the savings in potential probate costs and taxes. Often, a property owner finds that the higher initial costs to create a trust are justified by the flexibility, control and property management benefits of having a trust.

There are other advantages to having a revocable living trust. This short article cannot cover them all. The estate tax, gift tax and income tax laws have recently changed (and will probably change again) so possible tax benefits of having a trust have also changed. For some owners, it could be beneficial for estate tax purposes, for example, to give all or part of a timeshare to a child, or divide timeshares among children, etc. For other owners, it would be more advantageous, under the tax laws, to make a different distribution or to keep the timeshares in your name or in a trust.

It is very important that you consult with your accountant and estate planning lawyer to determine if a revocable trust is right for your circumstances or if planned distributions will adversely affect your tax situation. Every estate and family situation is different. You should have an attorney with training and experience in estate planning law help you create your trust and related documents.

If you have already created a trust, you need to make sure that you transfer your timeshare and other real property into the trust by way of properly prepared and recorded conveyance documents. Most states have their own unique recording requirements. The documents should be prepared by an attorney licensed in the state where the property is located.