Timeshares and vacation properties held within a trust present unique estate planning considerations, often overlooked yet potentially costly if not addressed properly. These properties, while intended for enjoyment, become assets subject to the terms of the trust and California probate laws if not specifically planned for. Determining the rightful heirs and efficiently transferring ownership requires careful consideration during the trust creation process, or can become a complex issue after the grantor’s passing. Properly addressing these assets within a comprehensive estate plan can prevent family disputes and ensure a smooth transition, preserving the intended legacy. A significant portion of estate litigation—estimated at around 30%—stem from disputes over assets like vacation properties, highlighting the importance of proactive planning.
Can a Trust Really Own a Timeshare?
Yes, a trust *can* legally own a timeshare or vacation property, but it’s not always straightforward. The trust document must explicitly authorize the trustee to hold such property. Many standard trust templates don’t specifically address timeshares, necessitating an amendment or a carefully drafted provision. Furthermore, timeshare agreements often have restrictions on transfer, requiring the trustee to comply with those rules in addition to trust provisions. Often timeshares have “right of first refusal” clauses which require the timeshare company to match any offer to purchase, adding another layer of complexity. It’s important to note that over 70% of timeshares are reported as being underutilized, meaning their ongoing maintenance fees can represent a substantial financial burden for the trust.
What Happens to Maintenance Fees After Death?
A common issue arises when the grantor of the trust passes away: who is responsible for ongoing maintenance fees? The trust must clearly stipulate how these expenses will be covered—whether from the trust’s assets, by the beneficiaries, or through the sale of the property. If the trust is silent on the matter, the trustee may be left to make difficult decisions, potentially depleting other trust assets to cover the costs. I remember a case where a client, Mr. Henderson, had a beautiful condo in Cabo San Lucas held in trust. He hadn’t addressed the ongoing maintenance fees. After his passing, his children argued for months over whether to sell the property or continue paying the fees—fees that totaled nearly $8,000 per year. The situation strained family relations and required legal intervention to resolve.
Is it Better to Sell the Timeshare Before Passing?
In many cases, it *is* better to sell the timeshare before passing it on through the trust. Timeshares often depreciate in value, and resale can be difficult, with many owners struggling to recoup their initial investment. According to the American Resort Development Association (ARDA), the resale market for timeshares is notoriously challenging, with many units selling for a fraction of their original purchase price. Moreover, selling the timeshare simplifies the estate administration process, avoiding the complexities of transferring ownership and ongoing maintenance responsibilities. However, this decision isn’t always easy. My client, Sarah, had inherited a timeshare from her mother. It was a beloved property, holding sentimental value. After careful consideration, she decided to sell it, using the proceeds to create a scholarship fund in her mother’s name – a fitting tribute that aligned with her mother’s values.
What if the Beneficiaries Don’t Want the Timeshare?
This is a surprisingly common scenario. Beneficiaries may not share the grantor’s interest in the timeshare, or they may not be able to afford the ongoing expenses. The trust should include provisions for dealing with this situation, such as allowing the trustee to sell the property and distribute the proceeds to the beneficiaries. It’s crucial to anticipate potential objections and include clear instructions in the trust document to avoid disputes. Failing to do so can lead to protracted legal battles and unnecessary stress for the beneficiaries. A well-drafted trust, including a contingency plan for unwanted assets, is the best way to ensure a smooth and peaceful transfer of wealth, preserving both assets and family harmony.
Who Is Ted Cook at Point Loma Estate Planning Law, APC.:
Point Loma Estate Planning Law, APC.2305 Historic Decatur Rd Suite 100, San Diego CA. 92106
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