Timeshare Traps and How to Avoid Them

Timeshare Traps and How to Avoid Them

If you are fortunate enough to go on that well-deserved vacation this year, then there is a good chance you will find yourself listening to the all-too-familiar ‘timeshare marketing pitch.’   Most people are familiar with the concept of a timeshare, but there is more than meets the eye.  The repercussions of owning a timeshare can vary tremendously depending on many things, including whether it is a real property interest, a mere right to use the property, or some other arrangement.  

#1 – Timeshares are not Inherently Bad Investments.  If a timeshare really interests you (and they are legitimate and worthwhile investments for many families), you can plan in advance to take ownership the right way and avoid legal traps and snares down the road.  Most people do not realize the thicket of possible legal ramifications inevitable to owning one (or more).  Timeshares are typically sold in a high-pressure environment, chock full of free food, gifts, and even vacations; these tools are all part of a business model intentionally designed to get vacationers to make impulsive buying decisions.

#2 – Type of Ownership is Critical.  If you own real property outside Virginia and die without proper estate planning documents in place (no, a simple Will is not enough), then a representative of your estate must appear in every state where such property is located.  This means that if you live in Virginia but you own a timeshare for one-week in Florida, if it is considered “real property,” then the Florida courts must determine how and to whom your interest is distributed. 

If your purchase of the timeshare is in the form of a deeded contract, your interest is considered ownership of real property.  Just like your residence, this real property may be sold, rented, gifted, or given to your heirs after death.  Similarly, your timeshare interest may also be subject to real estate taxes and probate.  While taxes are usually included in your timeshare maintenance fee, the disposition of your ownership interest after your death is another issue.  If you die without a trust to dispose of your assets, then the court system where the timeshare is located will either “probate” your Will, or follow the statutes of the state if you have no Will.  In any event, dying without a trust and with real property can cause major headaches for your executor. Luckily this can all be avoided.

If the deed to your current or prospective timeshare is a “leasehold deed,” then it means ownership only lasts for a specified period of time.  A “right to use” contract means what it sounds like – the purchaser acquires a right to use and enjoy the rights of the property owner (usually a resort).  However, the pitfall of a “right to use” contract is that some benefits you may not care about, like a club membership, may be included.  The “right to use” form of timeshare acquisition is used heavily overseas and in Mexico, because the ownership of foreign real property interests opens a door to many more legal complexities.

#3 – You Should Not Decide Then and There.  Do not sign anything before you leave, unless you already have a revocable living trust and have already met with your lawyer regarding the timeshare you are considering.  The concept of a timeshare is attractive, but before saying “yes,” it is absolutely imperative to speak with a good estate planning attorney.  For those who own timeshares already, whether or not you are considering an additional purchase, it is very important to be sure that transfer of your ownership interests in these timeshares upon your death will not result in expensive and time-consuming paperwork for your heirs.

Image: photostock / FreeDigitalPhotos.net Evan H. Farr on Google +

Complications: Divorce and Special Needs Children

Divorce is a challenging process for everyone. If you have a child with special needs, the choices you make during a divorce can have lifelong repercussions, both for you and for the child. It is not always in the best interest of a child with a disability to receive a large award because child support could cancel the child's SSI and Medicaid benefits.

But this is not the only problem child support forms for a child with special needs; a complicated process that the Social Security Administration (SSA) uses to evaluate household income can also wreak havoc with SSI and Medicaid benefits.

When a disabled child lives in a household with other people, the SSA takes into account the income of everyone who lives with the disabled child when it calculates eligibility for benefits. This is known as "income deeming." The SSA applies a formula to define what portion of the household income applies towards eligibility. If the total household income is too high, the disabled child can lose SSI and Medicaid.

In families going through a divorce, income deeming becomes particularly important for two reasons. First, a child with special needs may have siblings who are also receiving child support from an absent parent. In these cases, that additional child support will count as household income and could place the SSI recipient's benefits in jeopardy. Second, the choice of parent who will have custody of the child (the custodial parent) could throw off an SSI benefit if one parent's household income is significantly different from the others. In many cases, loss of SSI benefits is not a key factor in choosing a custodial parent. But in other cases, specifically when the child receives significant benefits from SSI and Medicaid, the choice of a custodial parent could make a tremendous difference for that child's welfare.
Image: africa / FreeDigitalPhotos.net Evan H. Farr on Google +

Estate Planning Attorneys Warn About Matching Beneficiaries to Those Named in Your Will or Trust

As an estate planning attorney in Virginia, I have unfortunately seen many circumstances where a person goes through the time and expense of having an estate plan done, only to fail to update their beneficiaries on their financial or retirement accounts before they pass away.

An example of this would be Mary naming her brother Bill as the beneficiary of her life insurance policy in her trust, but at the time of her death, she had a different beneficiary named on the policy itself.

Just as life changes, so do your relationships, which can affect who you want to receive your assets --especially if you do not have children. Changing the beneficiary on assets such as bank accounts or life insurance policies is not uncommon, but you must remember to make sure that your will or trust reflects that change also.

Keeping your estate planning documents and beneficiaries up-to-date and coordinated is a quick and painless way to prevent legal headaches from occurring after you are gone.

Having two different named beneficiaries on two different documents can result in a lengthy and costly process to fix it – especially if each named person believes that they should be the one to inherit the asset.

The best way to avoid problems like this is to have a lawyer who focuses on wills and trusts handle every aspect of your estate.

Image: worradmu / FreeDigitalPhotos.net

Evan H. Farr on Google +