How Do Timeshares Fit into a Louisville Estate Plan?

For many families in Louisville, a timeshare represents a guaranteed escape—a week or two each year reserved for relaxation and creating memories. It feels like a permanent vacation spot without the full burden of owning a second home. The purchase is often filled with excitement and visions of future enjoyment. However, the conversation rarely turns to what happens to that timeshare when the owner passes away. What was once a cherished asset can quickly become a complex and costly problem for the loved ones left behind.

Failing to properly account for a timeshare in your estate plan can create significant legal and financial burdens for your family. 

What Type of Timeshare Do You Actually Own?

Before you can plan for your timeshare, it is important to identify exactly what you own. Timeshare interests generally fall into two categories, and the distinction has major implications for your estate.

• Deeded Timeshare: This is the most common type. You own a fractional interest in the actual real estate, typically as a “tenancy in common” with other owners. You receive a deed, the ownership is recorded, and you have property rights. For estate planning purposes, a deeded timeshare is treated like any other piece of real property you own.
• Right-to-Use Timeshare: With this model, you do not own any real estate. Instead, you have a contractual right, much like a lease or a club membership, to use the property for a specific period each year for a set number of years. The resort developer retains ownership of the property. The transfer of a right-to-use interest upon death is governed entirely by the terms of your contract with the resort.

Why Can Timeshares Complicate an Estate?

Many people are surprised to learn that a single timeshare can cause more administrative headaches than all their other assets combined. The primary issues stem from two areas: out-of-state property ownership and never-ending fees.

The Ancillary Probate Problem

If you are a Kentucky resident and own a deeded timeshare in another state—like Florida, South Carolina, or Nevada—your passing will trigger a legal process known as ancillary probate.

Here is how it works:

• Your main estate will go through probate in the Jefferson County Family Court here in Louisville.
• Because the timeshare is real property located in another state, a second, separate probate case must be opened in the county where the timeshare is located.
• This means your family has to hire another attorney in that state, pay additional court fees, and manage a long-distance legal proceeding, all of which adds significant cost and delay to settling your estate.

The Burden of Ongoing Fees

Timeshare ownership comes with annual maintenance fees, assessments, and property taxes. These obligations do not stop when the owner dies. The estate becomes responsible for paying them until the property is officially transferred to a beneficiary. If your heirs do not want the timeshare or the estate lacks the funds to cover these costs, it can create a serious financial strain and even lead to foreclosure actions against the property.

Can a Will Be Used to Transfer a Timeshare?

Yes, you can use your Last Will and Testament to name who should inherit your deeded timeshare. However, this is rarely the most effective method. A will does not avoid probate; in fact, it is the very document that directs the probate process. If you bequeath an out-of-state timeshare in your will, you are essentially guaranteeing that your family will have to endure the ancillary probate process mentioned earlier. While a will is a foundational part of any estate plan, relying on it for a timeshare transfer is often an inefficient and expensive choice.

How Does a Revocable Living Trust Solve the Timeshare Problem?

For many Louisville residents, the most effective tool for managing a timeshare within an estate plan is a Revocable Living Trust. A trust is a legal entity you create to hold your assets. You transfer ownership of your assets, including a deeded timeshare, into the trust. You continue to control and use the assets just as you did before, but legally, the trust owns them.

This strategy offers several key advantages for timeshare owners:

• Probate Avoidance: Assets held in a trust pass outside of probate. When you pass away, your chosen successor trustee can transfer the timeshare to your named beneficiaries according to the trust’s instructions, without any court involvement.
• Elimination of Ancillary Probate: Because the trust owns the out-of-state timeshare, there is no need to open a second probate case in that state. This saves your family thousands of dollars in legal fees and months of administrative hassle.
• Privacy and Efficiency: Unlike a will, which becomes a public record, a trust is a private document. The transfer of assets is handled privately and efficiently by your successor trustee.
• Clear Instructions: A trust allows you to leave detailed instructions. If you are unsure whether your children will want the timeshare, you can authorize the successor trustee to take specific actions, such as selling it or even transferring it back to the resort if possible.

What If Your Family Does Not Want to Inherit the Timeshare?

This is a very common scenario. While you may have enjoyed the timeshare for years, your children may live far away, have different vacation preferences, or simply not want the financial obligation of the annual fees. Forcing an unwanted timeshare on an heir can feel more like a punishment than a gift.

A comprehensive estate plan can address this possibility head-on:

The Right to Disclaim: Beneficiaries can legally refuse to accept an inheritance through a formal process called “disclaiming.” However, this just pushes the problem back to the estate, which is still responsible for the timeshare and its fees.

Providing a Clear Exit Strategy: A far better approach is to plan for this in your trust. You can include provisions that give your beneficiaries the first right of refusal. If they decline, you can authorize your successor trustee to use estate funds to:

• Attempt to sell the timeshare on the secondary market (which is notoriously difficult).
• Negotiate a “deed-back” or surrender with the resort management company.
• Engage a reputable timeshare exit company.

By planning for an exit, you give your family options and prevent them from being saddled with a property they cannot afford or do not want.

Steps for Integrating a Timeshare into Your Louisville Estate Plan

Taking control of how your timeshare is handled is a straightforward process when guided by an experienced attorney. The steps generally involve:

• Confirm Your Ownership Details: Find the deed for your timeshare to confirm whether it is a deeded interest or a right-to-use contract. Note the exact legal description and location.
• Have an Honest Family Discussion: Talk to your potential heirs. Ask them directly if they have any interest in inheriting the timeshare and its associated financial responsibilities. Their answer is a key piece of information for your planning.
• Establish a Revocable Living Trust: Work with an estate planning attorney to draft a trust that reflects your overall wishes for all your assets, not just the timeshare.
• Fund the Trust: The most important step is to re-title the timeshare in the name of your trust. This requires drafting and recording a new deed, a process your attorney will handle. A trust is only effective for assets it officially owns.
• Notify the Timeshare Company: Inform the resort or management company that the ownership has been transferred to your trust and provide them with the relevant documentation.

What is the Plan for Right-to-Use Timeshares and Vacation Points?

If you own a right-to-use interest or are part of a vacation points system, your situation is different. You own a contract, not real estate. Therefore, probate is not the primary concern. The main issue is transferability.

Your ability to pass this interest to your heirs is dictated entirely by the rules in your contract.

• Some contracts state that the membership terminates upon the owner’s death.
• Others may allow you to designate a beneficiary to take over the membership.
• Many require the beneficiary to go through an application process and pay a transfer fee.

Your estate plan should grant your Executor or Successor Trustee the authority to access these contracts and take the necessary steps to either transfer, sell, or terminate the membership according to the company’s procedures.

Common Questions About Kentucky Timeshare Planning

• Does owning a timeshare jointly with my spouse avoid probate? Joint ownership with the right of survivorship does avoid probate on the death of the first spouse. The property automatically passes to the survivor. However, it does not avoid probate on the second spouse’s death. At that point, the property would have to go through probate unless it is in a trust.
• Can my children be forced to pay the maintenance fees if they inherit? A beneficiary can disclaim the inheritance, but the estate remains liable for fees until the timeshare is disposed of. If the estate is distributed and a beneficiary accepts the timeshare, they then become responsible for all future fees.
• Is it difficult to transfer a timeshare into a trust? The process itself is not difficult for an attorney familiar with real estate transactions. It involves preparing a new deed and ensuring it is correctly recorded in the county where the timeshare is located. It is a necessary administrative step to make the trust effective.

Securing Your Legacy and Protecting Your Loved Ones

A timeshare can be a wonderful part of your life, but it requires special attention in your estate plan to prevent it from becoming a burden on your family. Proactive planning allows you to decide its future, whether that means passing it to the next generation seamlessly, providing a way for your family to sell it, or arranging for its responsible disposal. The legal team at John H. Ruby & Associates is dedicated to helping families throughout the Louisville, Kentucky area navigate these important decisions. We provide the knowledgeable guidance you need to create a robust estate plan that honors your wishes and protects your family from unnecessary cost and stress. 

Contact us today to schedule a consultation and take a vital step toward securing your family’s future.