Updated: Jan 11, 2022
If you’re reading this, you may be one of the thousand of timeshare owners who are worried about whether their timeshare obligation will pass to their children or heirs at your passing. The mounting cost of maintenance fees, yearly costs, and loan payments is understandably something that a child probably does not want to inherit. You may have called your timeshare company and asked whether it’s inevitable that your child must pay for your timeshare at your death, and they may have told you: “Yes, of course it passes to your heirs, it’s a debt just like anything else” however, that’s not entirely true.
Yes, a timeshare is a debt. If you remember when you first purchased your timeshare, you signed many, many documents. Those documents comprise a contract between you and the timeshare company. Within those documents you may have been deeded a portion of property (uncommon) or given points that are held in the company’s trust (common) that are used to book vacations. You may have taken out a loan directly with the timeshare company to pay off the balance, or possibly your timeshare is “current” and the only payments you make are annual maintenance fee payments. Regardless of your set-up the following is true:
When a timeshare company represents that the timeshare contract you entered is a debt like any other, they’re not wrong, but it doesn’t represent the entire picture. There are two steps in understanding whether a timeshare passes to your heirs. The first step is to understand what happens to your timeshare debt at death:
Before estate assets are distributed to the decedent’s heirs or devisees, creditors have a primary right to have their rightful claims paid. Debts are paid in a specific order of priority depending on their categorization into different types or classes of debt. First are debts owed the United States or to California (i.e. taxes), second are expenses of administration of the estate, third are obligations secured by a mortgage, deed of trust, or other lien, and so on. Your timeshare interest falls into that third category because it’s either secured by a mortgage or is secured by a deed. If your timeshare is “current” then there are no debts to be passed on to your heirs and you immediate go to step 2.
Under step 1: If the timeshare is secured by a mortgage or a lien, the timeshare company must first foreclose on your interest (which is the right-to-use the timeshare itself), to pay for the outstanding balance. In California per Civ Code § 580(b) and under the UCC, the buck stops there. The timeshare company must foreclose on their interest to pay off the debt you owe and they cannot do anything else. Therefore, no, your heir is not required to pay off your debt.
The second step is to understand what happen to your timeshare contract obligation at death:
Under step 2: At the end of the day, a timeshare is nothing more than a contract obligation. You may choose to assign that obligation (called a testacy transfer) or you may not assign it and it passes to your heirs via intestacy. Either way your heir has the right to renounce or disclaim any interest by testate or intestate succession or by inter vivos transfer, including exercise of the right to surrender the right to revoke a revocable trust. They need only follow the proper procedures under the probate code to do so. Therefore, in either scenario, your heir is not required to take your timeshare interest at your death.
If you feel bogged down by your timeshare and you're looking for a way out, contact our law offices toll-free for a free consultation and quote at: +1(800)233-8521.