What happens to a timeshare when you divorce?
When spouses split, all assets and liabilities must be split too. The big-ticket items like the house, the vehicles, and the retirement accounts are probably the most important assets that spouses consider, but there are plenty of other assets out there that you’ll want to address as well. One that seems to pop up fairly frequently is a time-share.
Timeshares are a unique type of asset; they are difficult to value, nearly impossible to sell, and frequently neither spouse wants to keep it. So what are your options?
The reality is, although it is a unique asset, when it comes to dividing a timeshare the options are the same as they are with any other asset: sell, share, or have one spouse buy the other spouse out.
Cut Your Losses and Sell
While each situation may vary, it seems that in many cases neither spouse wants to take control of the time-share. Why? Most people buy a timeshare while already on vacation. When you are having such a wonderful time away from your daily grind your defenses are down. ‘I’m having so much fun, why wouldn’t I want to commit to this every year?’ you might ask.
When you get home reality sinks in. You’ve now committed to only vacation at this one resort (or one brand of resorts) every year indefinitely. Because you have invested in this timeshare you are less inclined to go on other vacations with family and friends. Then there’s the ever increasing maintenance fees that seem to rise at a rate much higher than inflation. We worked with one couple whose maintenance fee started at $150 per year and rose to nearly $800 per year over the course of five years.
If this is you, and you’ve regretted this purchase ever since you returned from that family vacation years ago as a timeshare owner, then chances are neither you nor your spouse is going to want to take ownership of this asset upon divorce. Your best bet is to sell it, split the proceeds (if any) and put your timeshare days behind you.
Be prepared to lose money on this transaction. Have you heard the age-old saying about how a car depreciates the moment you drive it off the lot? Well the same applies to most timeshares. The moment you walk out of that conference room with your timeshare contract in hand, it has already started to depreciate. This isn’t always the case; in rare circumstances a timeshare may appreciate in value, but more often than not you are dealing with a depreciating asset.
So how do you actually sell it? There is a very large reseller market so you may find a private buyer who is interested. Some brokers will take on a timeshare sale as well, however be cautious of large upfront fees. The Federal Trade Commission points out certain red flags for consumers to be aware of if they choose to use a broker to sell their timeshare.
Share the Share
I know, it seems like up to this point we’ve been painting this picture that timeshares are horrible. They aren’t all bad! While financially they may not be a wise investment, some couples love their timeshare.
Since you’ve paid up front for ownership, you will probably find yourself taking more vacations than you would otherwise. Money is the biggest reason most people put off vacations, and because your timeshare is paid for, it feels like a ‘free’ vacation. Some truly love the resort they’ve invested in as well. Maybe you have really grown to love the location and amenities and you don’t really care that you take the same vacation every year. If you want to mix it up you can transfer your timeshare points to another resort anyway?
If this is you, and you and your spouse have loved using your timeshare year after year, then you may end up opting to share it.
The benefit to using this option is that you won’t take the same financial loss that you would if you sold the timeshare on the open market. The downside is that it will force you to keep some level of communication with your former spouse. For this reason, it is only advisable for amicable spouses to attempt this route. And even if things are harmonious now, what is going to happen the first time your spouse wants to bring his new girlfriend to your former marital vacation spot?
If you and your spouse are going to ‘share the share,’ you’ll want to be sure that you include the details of this in your separation agreement. Who will the timeshare paperwork and bills be sent to? How will you split the maintenance fee? What happens if that person fails to pay? Which weeks will each spouse take? What if you want to swap weeks? What if you want to cash in points to use at another resort? All of these questions can and should be addressed in your agreement so that there are no surprises down the road.
You Want It, You Buy It
Whenever spouses part ways there is always an asset that one spouse cares more about than the other. It is inevitable. One spouse is desperate to take the new bedroom furniture; another spouse is attached to a piece of artwork purchased abroad. There is always something that one spouse wants more than the other spouse does.
Maybe there is actually value to the timeshare, or maybe it’s near Disney World and you love taking your children or grandchildren there every year. Maybe you have just grown to love the resort. Or maybe your timeshare is near an exclusive golf course and your spouse couldn’t care less about golf. There are endless scenarios, but it may be the case in your separation that one spouse wants to keep the share and the other spouse is fine with that.
If this is you, you’ll need to be prepared to execute a ‘buy out;’ you will need to actually furnish your spouse with another asset or a cash value that reflects half the value of the timeshare. Which begs the question: what is the value of the timeshare?
In some cases a timeshare is an asset, in others it is a liability. You’ll need to let your attorney dig into the paperwork and view the transactions related to your timeshare. In some cases, you may actually need to have the timeshare appraised. However, if one spouse would truly rather just walk away from the share, you might not even need to place a value on it.
The Bottom Line
Your timeshare is an asset (or a liability), and if it is marital, it’s subject to division just like all other marital property. You need to give some thought to how you want to approach this asset.