When it comes to investing in a timeshare, it’s crucial to have a clear understanding of the various types of ownership available to you. Beyond choosing the right company or property, knowing the different operating styles of timeshare programs can greatly impact your vacation plans.
In this blog, we’ll explore the various types of timeshare ownership, such as deeded, leased and point systems, as well as discuss considerations like tax implications, estate planning, and potential exit strategies. We aim to help ensure you have the necessary information to make an informed decision and maximize your timeshare plans.
Types of Timeshare Ownership
When it comes to purchasing a timeshare, there’s a few different options you can choose from – aside from the actual company or property. Make sure to do your research on the different operating styles of timeshare programs to assess which one may fit your vacation plans the best.
Deeded
In a deeded ownership, the purchaser has undivided interest that gives them exclusive right to occupy the timeshare premises during a designated time period. As the name suggests, they receive a deed to the property which enables them to rent, assign, sell, contribute, bequeath, or transfer to a third party.
Leased (Right-to-use)
In a leased timeshare, the purchase does not obtain ownership, but rather receives the right to use the timeshare for a specified period of time. After the period of time is used, the title to the timeshare property reverts back to the developer. Think of this option as leasing a car.
Fixed Week
A fixed week timeshare operates how the name implies: the owner can use the time share for a specific week during the year. The main benefit to this option is that the owner is guaranteed availability during the same week of each year, which could work well depending on your vacation schedule.
Floating Week
Owners have the ability to use their timeshare unit during a specific time period or season with a floating week option, however a vacation will have to be booked each year and it may not be available during busy times of the year.
Point System
A point system provides timeshare members access to different resorts within a defined resort group. Similar to the leased option, purchasers can use the property for a certain amount of time each year for a stated number of years. Unlike leased, points are purely contractual and often offer additional amenities or accommodations.
Tax Implications of Timeshares
Owning a timeshare can potentially impact your financial plan, depending on what your goals are for the future. During the time of your timeshare ownership, there are certain tax implications that may apply. For instance, owned timeshares can have deductible property taxes, interest, and can qualify for donation deductions in certain situations.
Additionally, consider your future plans for your timeshare. Are you planning to pass it along to your dependents? Be sure to have a conversation with all interested parties and potential beneficiaries, as it could become a burden for them. And if you do incorporate your timeshare into your estate plan, research your contract to ensure you’re able to pass it down.
Timeshare Exit Strategies
There are a few different strategies in offloading a timeshare and oftentimes the type of ownership you have determines the available options to you.
- Full Sale: similar to listing a house with a realtor. Estimated timeline of 3-12 months
- Private Sale: the same as full sale, but without utilizing a third party – be careful of scams! Estimated timeline of 3-12+ months
- Deed it Back to Resort/Company: no cash/investment returned to owner, but no further maintenance fees. Estimated timeline of 4 months
- Gift: give the timeshare away to a family member who will take over the maintenance fees and retain any equity in the property.
- Donate: give the timeshare to a charity (you can potentially receive a tax deduction for this option)
Key Takeaways
Purchasing a timeshare is a big decision but can provide an exciting opportunity to vacation with your family on your terms. Prior to purchasing, be sure to understand the types of timeshares to find an option that will accommodate your vacation goals. Read your contact carefully and be aware of potential exit strategies in the future. Be sure to consult your wealth advisor to assess any potential impact to your financial plan.
