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.
"Can you inherit a timeshare?" is a common concern among timeshare owners. If you find yourself worried about whether your timeshare obligation will pass on to your children or heirs, you're not alone.
The mounting costs of maintenance fees, yearly expenses, and loan payments can understandably make you question whether your loved ones should bear this burden.
COMMON QUESTIONS: How are timeshare memberships inherited?
A timeshare can be inherited even if it has only a few years left before it expires.
If a timeshare is owned in perpetuity, it can be passed down to the next-of-kin or designated beneficiary for generations.
You may have reached out to your timeshare company for clarification, only to be told that your heirs are indeed responsible for the debt, as it is treated like any other financial obligation.
However, this explanation doesn't provide the full picture. To truly understand whether a timeshare can be inherited, it is crucial to grasp the two-step process involved.
The first step involves examining what happens to your timeshare debt upon your passing:
Before estate assets are distributed to your heirs or devisees, creditors have the primary right to have their rightful claims paid.
Debts are prioritized based on their classification, such as taxes owed to the United States or California, expenses associated with estate administration, and obligations secured by a mortgage, deed of trust, or other liens.
Your timeshare interest falls into the latter category, as it is either secured by a mortgage or deed.
If your timeshare remains "current" and there are no outstanding debts, there is no financial burden to be passed on to your heirs.
In this case, you can proceed to the second step. Under the second step, it is important to understand what happens to your timeshare contract obligation upon your passing:
Ultimately, a timeshare represents a contractual obligation.
You have the option to assign this obligation, known as an intestacy transfer, or it may pass on to your heirs through intestacy.
Regardless of the method, your heirs have the right to renounce or disclaim any interest in the timeshare, whether through testate or intestate succession or even through the exercise of their right to surrender a revocable trust.
By following the proper procedures outlined in the probate code, your heirs can choose not to inherit the timeshare interest.
Therefore, in either scenario, your heirs are not obligated to assume the responsibility of your timeshare interest upon your passing.
It is important to consult legal professionals who specialize in real estate law and timeshare contract cancellation to ensure the smooth transition of your assets and to fully understand the specific laws and regulations governing timeshare inheritance.
While timeshare companies may represent the timeshare contract as a debt akin to any other, it is crucial to understand the complete process.
By comprehending the treatment of timeshare debt and the rights of your heirs in regard to the contractual obligation, you can make informed decisions and provide clarity for your loved ones regarding the potential inheritance of your timeshare interest.
Newport Beach Real Estate Attorneys and timeshare exit attorneys of Sussman & Associates have significant experience in resolving real estate matters on a full range of situations involving retail and commercial properties.