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Planning Issues with Timeshares

Insights Financial Planning Just For Fun

Everyone likes vacations. Time away from our usual routine, sights and people is important to many and there are probably as many ways to have a vacation as there are people wanting them. One common approach to taking vacations is the purchase of one or more timeshares. Most timeshares allow the purchaser an annual block of time in a residential unit located in some variation of vacation destination such as a resort. There are many large companies selling timeshares in attractive locations (think Marriott, Hyatt, Disney to name but a few) as well as plenty of smaller, lesser known companies offering similar accommodations. Timeshares are a big business. 

When and if you are looking to purchase a timeshare, two of the biggest considerations are location and time. For example, when and where you are entitled to use your timeshare can be very important – you may not want a Florida or ski resort timeshare in the summer – winter is the most attractive season for those locations.  Expect to pay more for a timeshare that gives you the high demand time of year for the location. This will also potentially give you leverage when you look to swap your rights one year to go to a different time and location that appeals to you. Again, most timeshares include that sort of option.

Like many human interactions, the moment when we are considering the purchase of a timeshare is not the moment where we are thinking about the long term and particularly about what happens when we no longer want that timeshare or cannot make use of it. So it is important to be certain that the timeshare we are considering is one we really plan to and want to use for some time. The enjoyment in the continuing annual use of that timeshare is the most important aspect in understanding its value and meaning to you. If you are not making use of the timeshare, it is not a good investment. 

What if you have purchased a timeshare but have decided you no longer wish to use it? There are a number of options, most of which are not all that appealing. First off, if you purchase your timeshare at retail – directly from one of those big companies mentioned above – you can expect to only receive a small portion of your investment upon a sale of the timeshare. There are substantial built-in costs (marketing, commissions) for those retail timeshares and those typically won’t be recovered upon such a sale. 

Interestingly, there is a significant market for timeshares generally with various services competing to help you sell your timeshare or to provide a forum for you to advertise the timeshare to interested persons. As you might guess, there are a LOT of unwanted timeshares out there and you could get a real bargain if you want to buy one. However, the supply of sellers far outnumbers the interested buyers and unless your timeshare is for a particularly desirable location and/or season, expect a significant discount on any sale you make. Note also that professionals in this business suggest that you avoid any timeshare selling service that asks for fees up front for them to assist you or suggests that you can make all your money back on a sale. 

A related and useful approach for some no longer interested in their timeshares will be to rent the timeshare where that is permitted under your agreement/contract. This can help defray the annual maintenance costs and other charges typically associated with ownership of a timeshare interest. It won’t have the same impact as completely getting shed of the timeshare but it may help when the costs become too much to bear and interest in the property has waned to the point you can’t or won’t be able to use the timeshare. 

A far less workable solution is to donate your timeshare to charity. Here you have the obvious problem of valuation necessary to claim any kind of tax benefit and the less obvious problem of finding a charity that will accept a timeshare without charging you for some of the costs associated with taking that timeshare off your hands. Similarly, it is unlikely that the company which sold you that timeshare will want to take it back. It is almost never profitable for them and as we already know there is not much secondary demand for most timeshare interests. 

A last resort is, of course, to either gift the timeshare to a family member who actually would like to have it and who will both use it and be able to pay the ongoing costs. Although the owner does not receive any money for that transfer during life (or at death) there can be the satisfaction of having the timeshare go to someone who will appreciate it. And the ongoing costs will not be a burden to the giver. 

Finally, whatever approach one chooses to take – including doing nothing at all – it is best to keep current with the maintenance fees and other costs associated with the ownership of the timeshare. It almost certainly won’t sell if there are arrears in payments and gifting a debt is not going to make for a happy recipient. 

George Chamberlin & Mentor RIA Consulting © 2018

(804) 591-1657