If you have had the good fortune of enjoying a vacation home or timeshare, good for you! Don’t be too quick to assume, however, that family or friends want to continue your tradition when you die. Experts point out that even when bequeathed with the best of intentions, timeshares and vacation homes can be inheritance headaches.
Timeshare?
Estate planning experts, like Neil Carbone of Farrell Fritz in New York, encourage families to proactively discuss plans and assets, with a special focus on identifying potential sources of stress and even conflict. Kiplinger reports that timeshares are one such example:
A timeshare is a long-term contract where you agree to rent out an annual trip to a resort or vacation property. These contracts last decades, sometimes for life, and are notoriously difficult to get out of. Even if you love your timeshare, think it’s a great deal and have had plenty of amazing memories, be very cautious about leaving it to the next generation.
“If you pass away and your kids inherit the timeshare, they’ll be on the hook for the ongoing — and ever-increasing — contract costs,” says Carbone. “Some sellers even encourage buyers to put their young family members on the deed when they sign up for that very reason.” Carbone advises not to do so and that the kids should decide at your death whether they want to take over the contract. They can refuse to accept at this point, even if your will left them the property, by making a formal disclaimer of the timeshare. During probate, they will need to send a written document to executor of your estate and to the timeshare company saying they do not accept the property.
Thinking Ahead: Estate Bond?
Among the benefits of thoughtful estate planning is naming and preparing someone to manage our affairs when we die. Most frequently this person is referred to as an executor of the estate. Although often waived by families during the process of creating the will, estate bonds can help inspire the confidence of everyone involved. Sometimes they are even required during the probate process.
An estate bond is a type of fiduciary bond: it guarantees the beneficiaries that the estate will be administered in accordance with state law. Estate bonds are alternatively referred to as an executor, personal representative or probate bonds. It is quick and easy to obtain any of these bonds from leading, national provider: Colonial Surety Company. Just get a quote online, fill out the information, and enter a payment method. Print or e-file the bond right from anywhere. Getting an estate bond is so simple you can do it now: Obtain Estate Bond Here.
Gifting A Vacation Home?
Beloved family vacation homes can, unfortunately, become another source of stress and conflict when the original owner dies. Who gets to use it and when? Should we keep it or sell it? How much are the maintenance costs? The path to the agreement can be full of family landmines:
“Kids behave when the parents are still alive, but once they’re gone, that’s when the fighting really starts,” says Carbone. “I’ve seen siblings stop speaking to each other due to fights over an inherited vacation property.”
Even if everyone is on good terms, a vacation property does come with considerable expenses like maintenance, property taxes, insurance and any remaining mortgage. These costs could outweigh the value of the vacation property to your heirs….If you have a vacation home, start the inheritance discussion early with your heirs. Do they even want the property? If they want it, can you get them to agree on the terms? You could put together and have them sign a written co-tenancy after death agreement, which would legally lay out the rights and responsibilities of each heir after they take ownership of the property when you pass away. If it’s starting to look complicated and they can’t agree, the solution may be to sell.
As challenging as making decisions during estate planning can be, it’s also the best way to prevent undue heartache and stress down the road, and can even contribute to strengthened family relations. Don’t forget, an estate bond can be very helpful.
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