Probate for Timeshares

Did you “stop renting a room” and “buy the hotel”? Many folks have purchased timeshares – which are a form of ownership or a right to the use of property – often of resort properties. Multiple parties own a single unit, and each person is allotted a period of time, for example, one week, in which they may use the property.

There are two basic types of timeshares: (1) the owner of the unit actually owns a piece of the real estate and (2) the owner of the unit has a lease or right to use the unit for the specified time.

If you own a unit of a condominium for a week, then you own real estate. A condo is an interest In real estate, part of the whole parcel of real estate. If you own a unit in a co-operative apartment for a week, you don’t own real estate. The building that is a co-op is owned by a Co-operative Housing Association which is a corporation. Owners of co-op units own shares in the corporation with a right to occupy a particular unit. Since the ownership interest is corporate stock, co-op owners to not own real estate – they own personalty. Most timeshares are condominiums since co-ops have caught on in only a few markets, most notably New York City.

As with other real estate and personalty, timeshares can be resold to another party, transferred as gifts, or inherited by beneficiaries. Beware – in some cases the lease-type timeshare cannot be transferred to your heirs.

What happens to your timeshare when you pass away? Like any other property, if there is a joint owner it passes to the surviving joint owner. If you are the only owner, it passes under your will to your beneficiaries or if you have no will, under the intestacy statute to your heirs.

If your timeshare is in another state or country – you could be leaving quite a problem for your family. If the timeshare interest is real estate because it is part of a condominium, its transfer and inheritance is governed by the laws of the state or country where it is located. That means that your executor will have to arrange for an ancillary probate in the state (or states) or country (or countries) where you own timeshares. That, in turn, means expense. The executor will need an attorney in the ancillary state as well as in the domiciliary state. There will be costs and filing fees.

Probate is a legal process by which title to property is formally transferred at death. A primary probate proceeding is opened in the state where the deceased is domiciled at time of death. Ancillary probate is a probate proceeding opened in another state to transfer property owned by the deceased in that state. Real estate, including a timeshare interest, if located in a non-domiciliary state (or another country) must be transferred via an ancillary probate proceeding in that jurisdiction(s). The cost of a single ancillary probate proceeding can be thousands of dollars just to transfer a single timeshare week.

Beneficiaries who are faced with this dilemma sometimes choose not to go the route of ancillary probate and just abandoned the timeshare. In general, timeshares are hard to sell unless they are the cream of the crop. The beneficiary has no obligation to deal with the timeshare – they don’t own it until there is an ancillary probate. If a beneficiary truly doesn’t want the time share, he or she may be better off skipping the cost of ancillary probate rather than being saddled its costs and the maintenance fee on a timeshare that he doesn’t want and can’t sell.

If you have a timeshare, do some estate planning and save your beneficiaries from these headaches. If you have a revocable living trust, change the title to your timeshare from your name to the name of your trust as owner. The trustees become the owner, and no probate is required on your death.

If you don’t have a trust, it is probably not worth getting one only because you have a timeshare. In that case, consider adding beneficiaries as joint owners so that, on your death, the timeshare passes to the beneficiaries by operation of law, and no ancillary probate is necessary.

In some states (Pennsylvania is not one of them) you can have a beneficiary deed. A beneficiary deed is one in which you can name the next owner in the deed, the same way you do with a life insurance policy or a “pay on death” savings bond or bank account. If the ancillary state permits beneficiary deeds, you could change the title to your timeshare unit by keeping it in your name but adding a beneficiary to be the next owner on death. This mechanism also avoids the necessity for an ancillary probate proceeding.