11th Dec 2015
Timeshares are great vacation options. Rather than paying for a vacation home you may only be able to use once or twice a year, timeshares give you the opportunity to only pay for the property when you use it. Timeshares are practical and affordable vacation options for you, your family and your friends.
If you own a timeshare, it’s important to consider what will happen to it when you pass away. Most likely, you want your children or other family members to have the timeshare and continue enjoying vacations there. Most timeshares are generally an interest in real property, just like a house, apartment or piece of land, so how you hold the title affects how it will be transferred after your death.
Similar to your estate plan, you want the loved ones you leave behind to deal with as few costs, delays and legalities as possible once you’ve passed. Many people believe establishing a will and stating their wishes is enough information to leave. Unfortunately, establishing a will identifying what you would like to happen to your timeshare is not enough. When you have a will, it only directs the probate court on how to distribute your assets, it does not avoid the probate process.
The probate process can last for over a year or longer, tying up the timeshare and costing thousands of dollars in probate and attorney fees. Additionally, those you “willed” the timeshare to, typically don’t have access to the timeshare during this time; however, they may still have to pay the maintenance or HOA fees associated with the property. If you own a timeshare, you should strongly consider placing it in a trust.
Why a Trust?
In order for your loved ones to avoid probate, excessive legal fees and headaches amongst other things, your best option is to put your timeshare into a trust. There are several advantages to creating a trust and putting your timeshare into it.
The biggest benefit is that you maintain full control over the property. This allows you to revoke or amend the trust agreement as well as transfer or sell the property in the trust. If you chose to add the person(s) you wanted to inherit the timeshare as a “joint owner” rather than establishing a trust, you lose the ability to control the property. When you establish the trust, you do not need to consult with those you’re leaving the property to in order to manage the timeshare while you’re still living.
Another benefit to setting up a trust is that your various properties are conveyed into the trust. When you need to make a change to your trust, you typically only need to modify and amend one trust documents rather than redistributing all investment properties. While you are living, you will act as the trustee of your trust, which allows you to make these changes without the signature of the future beneficiaries.
A trust also allows you to arrange for the timeshare to be held in the trust for a period of years after you die. This is useful if you have younger children or plan to leave the timeshare to your grandchildren and you would like them to be adults or more mature before receiving it.
How to Establish Your Trust
The first step in establishing a trust for your timeshare is naming the beneficiaries. You can choose any beneficiary you would like including your spouse, children, grandchildren or friend. Next, you will need to choose the type of trust you want to establish. In California, a revocable living trust is often preferred. This type of trust allows you to amend and revoke the trust at any time.
Once you’ve decided who your beneficiaries will be and the type of trust you want to establish, you’ll need to appoint a Trustee or Successor of the Trust. This is the person who will manage the trust and deliver the property to the beneficiary. Common trustees include family members, friends, bank employees who work specifically in wealth management and professional trust managers.
The next step is to prepare and sign the trust. Your living trust is a legal document; therefore, it needs to be prepared by an estate planning lawyer. When you meet with an estate planning professional, be sure to ask them about their qualifications as well as any underlying financial incentives. Unfortunately, many people find themselves in situations where “financial planners” have pressured them into purchasing expensive life insurance and annuity products rather than focusing on building their trust.
Additionally, be aware of individuals who call themselves “trust specialists” and “certified planners.” Many of these individuals are not qualified to establish your trust and instead, want to gain access to your financial information to sell you products you don’t need. Consult with a lawyer who will provide counsel and legal advice without putting any additional pressure on you.
Once you’ve selected a professional to help you establish your trust, they will prepare the document and you will sign the trust protecting your timeshare and those you intend on leaving it to. If you have already established a trust, but have not yet transferred your timeshare and other real estate property into the trust, consider doing this soon. The early stages of planning and trust administration are critical. You can add your timeshare to your trust by working with your estate planning lawyer.
A timeshare is something very valuable to you and your family. When you work with us to put your timeshare into a trust, we advise you on all the relevant legal issues which impact Trust Administration. These issues include California Probate and Trust Law, Federal Estate and Gift Taxation Law including 706 Estate Tax Return filings, Income Tax Law including Fiduciary Tax Return filing, and issues concerning inventory, appraisal, sale and transfer of assets, beneficiary distributions, and accounting.
We are personally committed to designing each client’s estate plan based on their individual needs and wants. Every situation is different so if you have questions, contact us today to determine if placing your timeshare into a trust is right for you and your family.
For questions, or to schedule a consultation, call the office today at 714 385 0044.