It seems like you can’t throw a rock in Florida without hitting someone who owns a timeshare, or who considered buying a timeshare. In general, the lucky ones are those who walked away from the sales pitch.
Don’t get me wrong – I’m sure there are millions of Floridians who actually use their week or two for getaways or family vacations. At least for a while. But, as an estate planning, elder law, and probate attorney, I frequently see families dealing with the downside of timeshare ownership. And as a financial professional, I can tell you they are NOT an investment – they’re an ongoing expense for an illiquid asset that will not appreciate, much like a swimming pool. People buy such things because they want them, not because they make any financial sense.
A timeshare is a form of fractional ownership in a property, typically in a resort or vacation destination. For example, if you purchase one week at a timeshare condominium each year, you own a 1/52 portion of that unit. Timeshares may be evidenced by a deed (you purchased an ownership interest in the property) or just a contract (you leased the right to use the property).
So, what are some of the downsides? Well, first of all, the fees never end. On top of the loan payment (if you financed your timeshare), there are annual fees, unexpected assessments, and miscellaneous fees to change weeks, trade locations, etc. And unlike a house, land, or even a car, you’ll never know what your timeshare is worth. While there are exceptions for the most desirable locations/weeks in places like Disney or highly desirable beach resorts, most “used” timeshares are NOT repurchased by the timeshare company, and end up being sold for next to nothing. In fact, sometimes it’s hard to even give them away!
Here’s a true story: Jack had a timeshare he no longer wanted. He gave it to a family member, Bill, as a gift. Bill used it for several years, but then had a financial setback and couldn’t afford the fees. He fell behind. He tried to sell it, but to no avail. So then he offered to give it back to Jack. Jack wanted no part of the timeshare and associated fees, and said “Thanks, but no thanks.” Then one day Jack received a recorded deed in the mail; Bill had quitclaimed the timeshare back to Jack! (In Florida, only the seller has to sign the deed). So, Jack then quitclaimed the timeshare back to Bill. I don’t know what happened after that – maybe they’re still tossing the hot potato back and forth.
Timeshares also cause problems at the owner’s death when:
- The owner never transferred it into his living trust, thus triggering probate for an illiquid asset.
- The owner became ill before death and stopped paying the annual fees or assessments, and at death she owes thousands of dollars to the timeshare company, for a property no one will buy.
- The timeshare was properly transferred to a living trust, but no heirs want it and they can’t find a buyer.
- The post-death transfer of the timeshare was done incorrectly, and eventually the timeshare company tells the heir that they can’t use the week until they re-probate the property and have the transfer done properly. Oh, but they still need to pay the fees and assessments!
Sometimes, abandonment is the only option children have when Mom and Dad leave them an unwanted timeshare, but it has to be done properly to prevent problems.
So, if you own a timeshare, find out whether anyone actually wants it when you die, AND whether they can afford to pay the fees and assessments year after year, even if they lose their job. If not, consider getting rid of it while you’re still alive. If you can.