Timeshare Inheritance Issue

[questions]

Where to begin? My sister-in-law (let’s call her Joan) is dying of cancer in her early 50’s. She is just about out of time and is losing her mental facilities. She is estranged from her husband (let’s call him Tom) – if she had time, she would divorce him – and Tom has issues that leave him too incompetent to deal with her situation or the incredible financial mess they have gotten themselves into. Joan is very ill and it’s hard to get concrete information from her.

Joan owns 3 timeshares, a small one in Cabo San Lucas with Tom, a Wyndam resort unit with Tom, and a large unit in a Berkshire resort that she owns with a friend (let’s call the friend Linda). Joan realizes that the time shares probably have no dollar value but she is upset with the thought that all the money she put into them over the years will be “wasted” if her family cannot use them in the future.

Joan and Tom’s units are fully paid for and have maintenance fees totaling about $2,000 a year. We assume that Tom has rights of survivorship and will be forced to take over full ownership of these units when Joan passes. I don’t believe they will be subject to probate or be considered part of Joan’s estate. Tom is not capable of handling this responsibility on any level. Joan’s siblings had offered to take these over by having Joan and Tom sign over the deeds, but we probably have no time left to do this. None of us really wanted them, we were simply trying to put Joan at ease with the thought that we and our children would think of her while enjoying future vacations resulting from these timeshares.

Hope I haven’t lost you, because I’m coming to the main problem. The third unit that Joan owns with her friend Linda cost about $30 grand so far and they still owe about $6 grand to the resort. They pay about $370 a month for the debt and the maintenance. We assume that Linda does not have rights of survivorship and that 50% of this timeshare will be subject to probate. The time share is Joan’s only “asset.” Joan owes money on her house – it’s in foreclosure and she is in debt to credit card companies. These debts are only in her name, not shared with Tom. The debts far outweigh the value of her share of the time share she owns with Linda.

Joan has made a will naming her siblings as beneficiaries. My husband and I plan to refuse the time share – I have no interest in owning a fractional share of a time share with a woman I barely know or the rest of my husband’s elderly siblings. I am encouraging his siblings to also refuse the time share, though they are not taking as a hard a look at this situation as I am. Will Joan’s debtors want the half interest in the time share? Will the debt on the time share have to be paid off first and with what? Will Linda be responsible for it? Will we need to get the debtors to sign off on not claiming the time share so Linda can get on with her life? I envision this thing being in probate forever. Is it possible to quickly change how the time share is deeded so Linda does has rights of survivorship, thereby avoiding probate? Also, one of the siblings has a vacation planned later this year with one of the time shares. Joan will probably have passed by then and I've cautioned the sibling against using the time share once it's in probate. Could it be construed as an acceptance of the inheritance and the debt?

I’d appreciate any advice or stories from people in similar situations.

[tulog]

I agree in your assessment that the timeshares lack a substantial market value. I realize this is a difficult proposal, but I think everyone should convince Joan that it is more important to put her financial and administrative affairs in order rather than insist on holding on to the timeshares. Timeshares are a rather unfortunate form of real estate. If the third time share is an asset, then she should sell it. If she cannot sell it, it probably has no market value.

For each timeshare, we ought to know who holds title, and in what form title is held. We need to know whether these timeshares are from a 'deeded interest project' which involves a deeded conveyance, or a 'right-to-use project' where title is vested in a third party. In a right-to-use project, the developer must keep accurate records for your inspection.

Depending on answers to those questions, there are two options I would consider:

A. Make an agreement with the developer to reconvey the timeshares back to them in exchange for a satisfaction of the promissory note or mortgage. Otherwise, if the timeshare promissory note or mortgage is not paid, the developer can foreclose to reacquire the deeded interest.

B. She files bankruptcy before she dies. The purpose is to allow her to retain exempt assets, while discharging her debts. She would declare as debts all the timeshare, mortgage, and credit card debts. If during bankruptcy the timeshare developers request a stay for the purpose of foreclosing, she can allow it. The federal bankruptcy exemptions would allow her to provide a more tangible benefit to her beneficiaries by retaining exempt assets which she could devise: http://www.law.cornell.edu/uscode/text/11/522

Lets say Joan insists on retaining the timeshares. If the timeshares are deeded interests, they can be reconveyed and the reconveyed deed recorded in the jurisdiction where the timeshare was created. Joan (et al) can reconvey to 'Joan and Linda as Joint Tenants with Right of Survivorship.' If Tom is an owner but does not want to own the property, Tom could quit claim his interest to Joan.

Although Joan and Tom are estranged this does not affect their marital status for inheritance purposes. If Joan's will is challenged, and found to be invalid, Tom can inherit through intestacy. If Joan wants a divorce but time is an issue, she could consider divorcing in Guam, a US territory, which provides a 7 day uncontested divorce.

I understand your caution about the sibling's vacation; I'd advise the same course of action.
Debt, however, is not inherited.

There is a risk through all of this that if Joan does not have her mental faculties, that a party could challenge her intent to convey property. In some jurisdictions, the execution and recording of the deed helps provide evidence of intent to convey. For the same reason, a party could challenge the validity of her will if it was made or modified recently.

[disneysteve]

The time share is Joan’s only “asset.” Joan owes money on her house – it’s in foreclosure and she is in debt to credit card companies. These debts are only in her name, not shared with Tom. The debts far outweigh the value of her share of the time share she owns with Linda.

This is really the crux of the story. Joan is broke. She has no money to her name and owns no assets of value. The timeshare is worthless as all timeshares are.

I think you're worrying about this too much. Debt isn't inherited. When Joan dies, her debts die with her - the timeshare, the mortgage, the credit cards, all of it. If she has no money or assets of value for the creditors to go after, they're out of luck and that's the end of the story.

And no, I wouldn't accept a timeshare willed to me.

[tulog]

The proper way to disclaim property is in writing within 9 months of the asset owner's death.