Recommendations who to use to create a Trust

[LeslieDet]

Our Vistana (KORV) ownership is already enrolled. Both Vistana (title department) and Marriott have said that our ownership status will not change when we add our niece and her husband to that deed. We shall see...

I helped an owner a few years ago whose uncle was adding her to the deed for his HHI week. The issues presented were whether the ROFR would kick in (if it had been a complete deed transfer to her, it would have) as well as the eligibility for enrollment. We secured in writing an agreement from MVC that by adding her to his deed, he would not lose owner level status; however, she was required to acknowledge that at the time he passes and title passes to her (because the deed was JTWROS), she would not be eligible to enroll the week and it would not count towards her owner level status.

 

[LeslieDet]

What about just adding our daughter to the deeds of our weeks instead of putting them in a trust? She wants the TS and she would be the executor too, when we pass?

Is it about the same amount of work and expense to add a name to the deed vs. adding the deed to an existing trust? From my layman's view, it seems like it might be similar.

If you add your daughter to the deed, that is better than not doing anything at all; however, adding others to your ownership can create unintended consequences. Those include the fact that she would be a legal owner, and have all rights and obligations associated therewith.

 

[Henry M.]

I don't have any issues with her being owner, but I'm curious whether it is just as easy to make the trust be the owner and then transfer everything to her later, as she is the executor of the trust.

Is there a difference in terms of actual effort and costs to add someone to the deed vs. changing the name on the deed to a family trust? Is there any drawback either way to have her own the timeshares once we pass, other than her having some ownership privileges if we add her to the current deed?

 

[SteveinHNL]

If you add your daughter to the deed, that is better than not doing anything at all; however, adding others to your ownership can create unintended consequences. Those include the fact that she would be a legal owner, and have all rights and obligations associated therewith.

Additionally, while the cost of adding your daughter to your title might be similar to transferring the title into trust, the latter solution would have the additional expense of having to create the trust. Using a trust would also have the additional benefits of your retaining sole and complete control of the TS during your lifetime, and not having your daughter directly on the hook for MFs or owner-associated costs such as special assessments should something change in the future. Trusts are a great vehicle, but involve additional expense.

 

[LeslieDet]

I don't have any issues with her being owner, but I'm curious whether it is just as easy to make the trust be the owner and then transfer everything to her later, as she is the executor of the trust.

Is there a difference in terms of actual effort and costs to add someone to the deed vs. changing the name on the deed to a family trust? Is there any drawback either way to have her own the timeshares once we pass, other than her having some ownership privileges if we add her to the current deed?

If you already have a trust in place, then it makes sense to place ownership of the timeshare into that trust. Your daughter is the successor trustee of the trust. Only estates being passed via will have executors. As successor trustee of your trust, then she would have the ability to decide what to do with the timeshare ownership at that time, without being the legal owner all the while.

 

[Kildahl]

Additionally, while the cost of adding your daughter to your title might be similar to transferring the title into trust, the latter solution would have the additional expense of having to create the trust. Using a trust would also have the additional benefits of your retaining sole and complete control of the TS during your lifetime, and not having your daughter directly on the hook for MFs or owner-associated costs such as special assessments should something change in the future. Trusts are a great vehicle, but involve additional expense.

FYI, with respect to the deed issue, some states authorize payable on death (POD) or transfer on death (TOD) deeds which would allow an owner to maintain all rights and liabilities of ownership until death.
The other thing to consider is that the cost of legal services in Hawaii[like most other things] is expensive compared to most states on the mainland. Also, an attorney that is not licensed in Hawaii will not prepare a Hawaii deed.

 

[LeslieDet]

FYI, with respect to the deed issue, some states authorize payable on death (POD) or transfer on death (TOD) deeds which would allow an owner to maintain all rights and liabilities of ownership until death.
The other thing to consider is that the cost of legal services in Hawaii[like most other things] is expensive compared to most states on the mainland. Also, an attorney that is not licensed in Hawaii will not prepare a Hawaii deed.

FYI - Hawaii Document Service will prepare the required deeds.

 

[Henry M.]

Thank you, LeslieDet.

 

[SteveinHNL]

FYI, with respect to the deed issue, some states authorize payable on death (POD) or transfer on death (TOD) deeds which would allow an owner to maintain all rights and liabilities of ownership until death.
The other thing to consider is that the cost of legal services in Hawaii[like most other things] is expensive compared to most states on the mainland. Also, an attorney that is not licensed in Hawaii will not prepare a Hawaii deed.

I happen to be an attorney licensed in Hawaii

 

[GerryWA]

Even if your kids decide they aren’t going to use the timeshares, unless you are ready to sell now, you’ll make your estate significantly easier to deal with by avoiding probate when your real property is owned by your trust. Otherwise, the executor of your estate is required to probate in every jurisdiction where the deceased owned real property. Whereas, when real property is owned by a trust, the successor trustee simply steps in to manage the property. That management can include selling if none of the beneficiaries are interested. All without court intervention or supervision.

Ok, what happens if no one in the family wants it, how long does it take to sell, where do funds come from to cover annual fees? The idea of a separate trust might work, but who manages it and how long does it exist. I dont consider a timeshare an asset, but a liability. There may be some unique exceptions, but I believe that statement is accurate in most cases. Typically you want to quickly disperse funds and close trust out.

 

[easyrider]

Even if your kids decide they aren’t going to use the timeshares, unless you are ready to sell now, you’ll make your estate significantly easier to deal with by avoiding probate when your real property is owned by your trust. Otherwise, the executor of your estate is required to probate in every jurisdiction where the deceased owned real property. Whereas, when real property is owned by a trust, the successor trustee simply steps in to manage the property. That management can include selling if none of the beneficiaries are interested. All without court intervention or supervision.

It would be easiest to just get rid of the timeshares while the owner is still alive, imo.

Bill

 

[LeslieDet]

Ok, what happens if no one in the family wants it, how long does it take to sell, where do funds come from to cover annual fees? The idea of a separate trust might work, but who manages it and how long does it exist. I dont consider a timeshare an asset, but a liability. There may be some unique exceptions, but I believe that statement is accurate in most cases. Typically you want to quickly disperse funds and close trust out.

If the beneficiaries of the trust do not want the timeshare, then the successor trustee can sell or otherwise dispose of the asset. I’m not using the term “asset” to connote value (ie asset vs liability), rather it’s an asset that is owned by the trust and carries a title, such that it requires that title to be conveyed legally to who ever will be the owner. As to who manages it, initially it would be th grantor of the trust, then it would shift to the successor trustee if and when the grantor resigns, becomes incapacitated or dies.

 

[LeslieDet]

It would be easiest to just get rid of the timeshares while the owner is still alive, imo.

Bill

Of course that’s preferable, but life (and death) happens. Often it’s when you’re making other plans.

 

[Henry M.]

In my case, my timeshares have value and my daughter wants them. However, if you have worthless timeshares (no resale value), that nobody wants, would It be easier to abandon them after the owner passes if they are not in the trust?

 

[SteveinHNL]

If the beneficiaries of the trust do not want the timeshare, then the successor trustee can sell or otherwise dispose of the asset. I’m not using the term “asset” to connote value (ie asset vs liability), rather it’s an asset that is owned by the trust and carries a title, such that it requires that title to be conveyed legally to who ever will be the owner. As to who manages it, initially it would be th grantor of the trust, then it would shift to the successor trustee if and when the grantor resigns, becomes incapacitated or dies.

There are 2 reasons I put my TS into a standalone timeshare trust. Reason 1 is it makes succession very easy when I am gone. My successor trustee can simply step in and continue use of the TS because the ownership is continuously in the trust (they will obviously have to inform the TS management company and take care of some paperwork with the management company so the new trustee is recognized). Reason 2 is equally important. If no one wants the TS, then no one has to accept appointment as successor trustee. They don't have to go to the trouble of selling an unwanted TS because it will just remain in the unadministered trust until at some point the management company gets tired of non-payment of MFs and takes the TS back. Since there are no other assets in the standalone trust, the TS company has no recourse against anyone, and no one's credit gets dinged except possibly mine, and I'm dead.

 

[LeslieDet]

There are 2 reasons I put my TS into a standalone timeshare trust. Reason 1 is it makes succession very easy when I am gone. My successor trustee can simply step in and continue use of the TS because the ownership is continuously in the trust (they will obviously have to inform the TS management company and take care of some paperwork with the management company so the new trustee is recognized). Reason 2 is equally important. If no one wants the TS, then no one has to accept appointment as successor trustee. They don't have to go to the trouble of selling an unwanted TS because it will just remain in the unadministered trust until at some point the management company gets tired of non-payment of MFs and takes the TS back. Since there are no other assets in the standalone trust, the TS company has no recourse against anyone, and no one's credit gets dinged except possibly mine, and I'm dead.

And, as you know from our prior conversations on this topic, I personally do not agree with that approach. I liken it to you putting your trash in a bag, and then leaving it to rot, thus burdening others to take care of it. I am of the belief that it is not appropriate to burden your fellow owners with your debt, and increase their MFs because you have left your trust destitute. Many folks mistakenly believe that by doing that they are somehow "effing" the developer, but they are not. Rather, they are simply burdening their fellow owners with the cost to foreclose, in addition to the unpaid maintenance fees.

 

[LeslieDet]

In my case, my timeshares have value and my daughter wants them. However, if you have worthless timeshares (no resale value), that nobody wants, would It be easier to abandon them after the owner passes if they are not in the trust?

No, it isn't because when the assets are not in a trust, it is up to the executor of your estate to deal with the sale or gift of the real property interests. If you do not have a will, then it is the administrator of the estate who is charged with identifying and disposing of all assets.

 

[SteveinHNL]

And, as you know from our prior conversations on this topic, I personally do not agree with that approach. I liken it to you putting your trash in a bag, and then leaving it to rot, thus burdening others to take care of it. I am of the belief that it is not appropriate to burden your fellow owners with your debt, and increase their MFs because you have left your trust destitute. Many folks mistakenly believe that by doing that they are somehow "effing" the developer, but they are not. Rather, they are simply burdening their fellow owners with the cost to foreclose, in addition to the unpaid maintenance fees.

I understand. I don't see it as "effing" the developer and it's certainly not intended as such. The fact is, the developer doesn't want it back and most of the time they are not willing to voluntarily take it back at all, and if they are, they frequently want you to pay them to take it. I'm not interested in funding a trust to continue paying for a TS after I'm dead. If they had a more user friendly way receiving unwanted TS back, they wouldn't incur a cost to foreclose, so I view this as part of the "circle of life" cost of doing business that is part of TS business. The reason I favor the trust vehicle is because upon my passing, it will be easy for my beneficiaries to keep and use the TS if they want it, or not be burdened with it if they don't.

 

[LeslieDet]

I understand. I don't see it as "effing" the developer and it's certainly not intended as such. The fact is, the developer doesn't want it back and most of the time they are not willing to voluntarily take it back at all, and if they are, they frequently want you to pay them to take it. I'm not interested in funding a trust to continue paying for a TS after I'm dead. If they had a more user friendly way receiving unwanted TS back, they wouldn't incur a cost to foreclose, so I view this as part of the "circle of life" cost of doing business that is part of TS business. The reason I favor the trust vehicle is because upon my passing, it will be easy for my beneficiaries to keep and use the TS if they want it, or not be burdened with it if they don't.

What you are ignoring is that the foreclosure cost is not borne by the developer; it is paid for by your HOA and fellow owners. So, it isn't any part of the developer's "circle of life" nor is it part of the developer's cost of doing business. I don't know about you, but when I buy a timeshare I do not expect that my fellow owners will purposefully cost me more money by defaulting on their maintenance fees and requiring the HOA to foreclose. I don't consider that to be part of the "cost of doing business" for me.

 

[SteveinHNL]

No, it isn't because when the assets are not in a trust, it is up to the executor of your estate to deal with the sale or gift of the real property interests. If you do not have a will, then it is the administrator of the estate who is charged with identifying and disposing of all assets.

This is very much a case where different lawyers will tell you different things. A lawyer, like Leslie, who will tell your survivors to spend money to hire a lawyer to administer a TS and get it transferred back to the management company, likely over the company's objection because they don't want it either, is not wrong. That is an option. However, it causes your survivors to spend money they don't have to spend to fix a problem that's not actually their problem (if it's in a standalone trust). My viewpoint is quite different, and very practical. I bought the timeshare. I'm dead. I'm not going to burden my survivors to deal with my problem, but I have it set up so they can pick up the TS and use it/pay for it if they desire to do so. If they choose not to do so, I have set it up so it can't affect them. And the TS management company will be able to get it back in the ordinary course of their business.

 

[SteveinHNL]

What you are ignoring is that the foreclosure cost is not borne by the developer; it is paid for by your HOA and fellow owners. So, it isn't any part of the developer's "circle of life" nor is it part of the developer's cost of doing business. I don't know about you, but when I buy a timeshare I do not expect that my fellow owners will purposefully cost me more money by defaulting on their maintenance fees and requiring the HOA to foreclose. I don't consider that to be part of the "cost of doing business" for me.

Of course it's part of the TS circle of life. It's not unusual for folks to die and for the AOAO to have to do some work to get it back. If they want to draft a deed to receive the unwanted TS back, that would be very cheap and easy for them, and I'm sure my survivors will happily sign it, if they don't want the TS.

 

[SteveinHNL]

What you are ignoring is that the foreclosure cost is not borne by the developer; it is paid for by your HOA and fellow owners. So, it isn't any part of the developer's "circle of life" nor is it part of the developer's cost of doing business. I don't know about you, but when I buy a timeshare I do not expect that my fellow owners will purposefully cost me more money by defaulting on their maintenance fees and requiring the HOA to foreclose. I don't consider that to be part of the "cost of doing business" for me.

When you refer to "purposely costing other owners more money by defaulting on MFs," let's remember we're talking about a situation where the owner has died. I don't think more is owed at that point. If I owned a home that was worth less than my mortgage when I died and my survivors didn't want to live in it, I would be very surprised if they decided to keep paying for it, and I would approve from heaven their decision to let it go into foreclosure if they elected to do so. Again, if the mortgage company wanted a deed in lieu of foreclosure, I would be happy for my survivors to cooperate with that.

 

[SteveinHNL]

No, it isn't because when the assets are not in a trust, it is up to the executor of your estate to deal with the sale or gift of the real property interests. If you do not have a will, then it is the administrator of the estate who is charged with identifying and disposing of all assets.

Here, I definitely agree with Leslie, provided that your estate has value aside from the worthless timeshares, which are a liability. Unless it's in a (standalone) trust, it's not easy to abandon because the TS liability is in the same basket as your assets. So the assets have to pay off the liabilities. If your estate doesn't have any assets (for example, if EVERYTHING except your TS interests are in a trust) and ONLY your TS is in your estate, then Leslie and I would disagree. She would say someone needs to open and administer an estate for the sole benefit of the TS manager. If the only property in your estate is a worthless TS, I would say let it go, don't spend money to open an estate, the TS will take care of itself in that case.

 

[LeslieDet]

Of course it's part of the TS circle of life. It's not unusual for folks to die and for the AOAO to have to do some work to get it back. If they want to draft a deed to receive the unwanted TS back, that would be very cheap and easy for them, and I'm sure my survivors will happily sign it, if they don't want the TS.

But instead of instructing your beneficiaries to do nothing, and just let the stand alone trust default, ultimately leading to foreclosure after the statutory number of years, wouldn't it be great if your successor trustee actually inquired of the HOA as to whether or not the HOA will accept a deed back?

 

[SteveinHNL]

But instead of instructing your beneficiaries to do nothing, and just let the stand alone trust default, ultimately leading to foreclosure after the statutory number of years, wouldn't it be great if your successor trustee actually inquired of the HOA as to whether or not the HOA will accept a deed back?

I'm not close enough to death where I have had discussions with my successor trustee to the trust that holds my timeshares. I'm still happily using them, blissfully ignorant of impending death. But yes, I agree with that Leslie.