What Happens to a Timeshare When You Die?
Many people buy a timeshare thinking it will provide years of family vacations while accumulating an asset. What often gets overlooked is what happens to that timeshare after the owner's death. Unlike many assets, a timeshare can continue generating annual maintenance fees, special assessments, taxes, and other obligations long after the owner is gone.
If you own a timeshare, or if a loved one recently passed away owning one, understanding how New Jersey estate law treats these interests can help avoid unpleasant surprises.
Is a Timeshare Part of Your Estate?
A timeshare is generally considered property owned by the deceased person. If the timeshare is titled solely in the owner's name and does not pass automatically to a joint owner or trust, it will typically become part of the probate estate and be administered by the executor. Whether the timeshare is a deeded real estate interest or a contractual right-to-use arrangement, it is generally treated as an asset of the estate. For a deeded interest, ancillary probate in the state where the resort is located may be required. This can increase the cost and complexity of estate administration. For a right-to-use contract, no real property is transferred and ancillary probate is generally not required, but the contractual obligations may still bind the estate.
Are Your Heirs Required to Take the Timeshare?
One of the most common myths about timeshares is that children automatically become personally responsible for them after a parent's death.
Under New Jersey law, beneficiaries generally have the right to disclaim an inheritance. A valid disclaimer allows a beneficiary to refuse property passing to them through a will, trust, or intestacy. If an heir properly disclaims the timeshare, the law treats that person as though they predeceased the decedent for purposes of that inheritance. The property then passes to the next eligible beneficiary. It is important to note that the next beneficiary in line must also file a disclaimer if they too do not want the timeshare.
However, heirs should be careful. Taking ownership, using the timeshare, or otherwise accepting benefits before seeking a disclaimer may limit their ability to refuse the interest later. In addition, a disclaimer must be made within nine months of the transfer (generally, the date of death) or within nine months after the disclaimant turns 21.
Is the Estate Responsible for Ongoing Timeshare Fees?
Although heirs may decline the inheritance, the estate still owns the timeshare during the estate administration process. As a result, maintenance fees, assessments, taxes, mortgage payments, and other contractual obligations may continue to accrue.
Like other creditor claims, these obligations may need to be addressed before distributions are made to beneficiaries. In many cases, an executor will evaluate whether the timeshare has any market value. Unfortunately, many timeshares have little or no resale value while continuing to generate annual expenses.
If the estate has sufficient assets, creditors may seek payment through the estate administration process. New Jersey law generally provides that debts are paid from estate assets before distributions to heirs. If the estate is insolvent or the timeshare is the only asset, creditors may simply be unable to collect. Keep this in mind because timeshare companies sometimes pursue aggressive collection tactics against estates and even against heirs personally.
What Should an Executor Do With a Timeshare?
Each situation is different, but a good first step is obtaining the timeshare documents. The executor should determine:
- Whether the interest is deeded real estate or a contractual membership.
- Whether a loan or mortgage remains outstanding.
- The amount of annual maintenance fees and assessments.
- Whether the timeshare company offers a surrender or deed-back program.
- Whether the interest has any realistic resale value.
In some cases, surrendering the timeshare to the resort may be the most economical solution. In others, a sale or transfer may be possible. Ignoring the issue rarely makes it disappear.
How Should a Timeshare Be Addressed in an Estate Plan?
If you own a timeshare consider selling or surrendering it before you pass away. Otherwise, your estate plan should specifically account for it. Far too often, people leave timeshares to heirs who have no interest in owning them. This can create unnecessary administrative costs, family conflict, and ongoing financial obligations.
A comprehensive estate plan should identify all real estate interests, including vacation properties and timeshares, and consider whether ownership should be transferred during life, placed into a trust, sold, surrendered, or specifically addressed in a will.
Just as important, your family should know the timeshare exists. Many executors discover a timeshare only after maintenance fee invoices begin arriving months after death. If you have not reviewed your estate plan recently, this is a good reminder to make sure assets such as timeshares, vacation properties, and other real estate are properly accounted for.
You may also find my articles on probate, inheriting a home, and a last will and testament helpful when evaluating how a timeshare fits into your overall estate plan.
The Bottom Line
A timeshare does not disappear when its owner dies.
In most cases, it becomes part of the estate, may need to pass through probate, and can continue generating expenses until it is transferred, sold, surrendered, or otherwise resolved. While heirs generally cannot be forced to accept an unwanted timeshare, the estate may still have to address the financial obligations associated with it.
Because timeshares often create unique challenges during estate administration, they should be specifically addressed as part of every New Jersey estate plan.