What is a timeshare?
Timeshares are a popular way to holiday; offering owners the opportunity to return to their favourite resort or holiday home year after year, without having to actually purchase a property outright. A timeshare contract is essentially a commitment to paying for annual trips to the same resort or family of resorts, and may be associated with the same week(s) each year. The timeshare user usually pays a lump sum up front (this could be done through finance) plus annual maintenance fees.
There are two types of timeshare contracts, each giving different rights in relation to the property. A share deeded contract divides property ownership between all the people in the scheme, and gives all the owners the right to transfer ownership. A shared leased or right-to-use contract, on the other hand divides the use of a property between the people in the scheme, usually for a certain number of years. The owners don’t have the right to sell or rent their timeshares, nor do they have any ownership rights to the properties.
Whether or not the timeshare has been paid for as a lump sum, or is being financed, all timeshares come with annual fees to cover maintenance, property insurance and property managements.
What happens to my timeshare when I die?
Whilst not the happiest of topics to be considering when thinking about your holiday plans, knowing what will happen to your timeshare contract once you have died is an important consideration when planning your estate. Many timeshares have what’s known as a perpetuity clause, which means the contract continues ‘forever’ after death, or have a set number of years left which may be longer than the owner is likely to live.
If your timeshare is owned jointly with a spouse, the surviving spouse will assume responsibility for the timeshare and the associated liabilities. However, if the timeshare is owned by a single person, unless the timeshare provider allows it to be passed back, the timeshare will form part of the owner’s estate. This means it needs to be taken into account when compiling your Will.
It’s worth noting that many timeshare providers in Europe are members of the Resort Development Organisation, which advises that, when the timeshare owner dies the timeshare can be passed back to the developer, as long as all liabilities to date have been paid up. It is important to find out whether your timeshare has this option, as if it does, dealing with it will be much simpler post death.
Who should I pass my timeshare to in my Will?
Although it’s a lovely thought to imagine loved ones enjoying your favourite holiday spot after you’re gone, you risk saddling a beneficiary with hefty annual fees for the option to holiday somewhere they might not have chosen to go to, or have the time to use.
One of the first things to consider is the affordability of the fees – what is due annually, are these fees likely to go up, and are there likely to be any additional costs? If the timeshare is under a shared leased contract you should consider the length left on the contract and whether the potential beneficiary is likely to be able to enjoy it for the remainder of the time.
You should also consider whether the timeshare can be sold, and if so, what its value is should the potential beneficiary wish to sell it. Remember, like any asset, the current value of your timeshare may have depreciated by the time of your death.
Secondly, aside from financing the timeshare, consider the practicalities of the beneficiary being able to enjoy it. If the timeshare is for a fixed period of time each year, will the beneficiary be able to actually visit at that time – for example if the beneficiary has children, the timeshare period being outside school holidays could make it impossible to use. You should also consider whether the potential beneficiary will be able to afford to travel to the timeshare, whether the timeshare property is an appropriate size for them and their family, and also whether they would actually choose to go to that resort or country.
It is extremely important to discuss the timeshare with the beneficiary in detail, to ensure they understand their responsibilities should they take it on. Even if they would like the timeshare now, their circumstances may change before they inherit the timeshare.
What if I’ve inherited a timeshare?
Firstly, consider whether you would like to keep and can afford the timeshare both now and in the future. Take the time to read and understand the terms of the timeshare and find out its current value (if it can be sold) so you know exactly what you’re considering taking on. Although you’ve been passed the timeshare in a Will, you are not obliged to keep it. It is possible to file a disclaimer which essentially means you are rejecting the responsibility.
However, this means the timeshare contract will be passed to the next beneficiary, or alternatively into the residue estate. This is important to consider, as should it be passed into the residuary estate, the executors will be obliged to pay any liabilities due from the estate. In this situation, the executors should consider other ways to exit the timeshare.
Firstly, they should check if there is an exit agreement, this is particularly likely if the timeshare provider is an RDO member. If not, the timeshare may be able to be sold, or given away.
If you are struggling to exit a timeshare you don’t want, would like some advice on passing a timeshare in your Will, then please contact us for further advice.