Inheritance is a word that may come with bittersweet emotion. Though it involves the painful loss of a loved one, it’s an opportunity to pass on to one’s heirs property that is of significant value. Or property that isn’t something your heirs want. Below we point out three types of assets that may not be the windfall they seem to your heirs and how you might ward off the complications while you’re still alive.
Timeshares come with long-term contracts where people agree to rent out a particular vacation property for many years or life. Although some avid travelers love timeshares, others find they aren’t worth the expense and are difficult to get out of. Some timeshare sellers encourage owners to put their children’s names on the deed so that more than one generation will continue to be on the hook for ever increasing fees. Don’t do it. Let grown children decide if they want to accept timeshare property after your death. If you’re already the recipient of a timeshare that you don’t want, it’s possible to refuse acceptance with a formal disclaimer. But don’t use the timeshare while making up your mind as that could stand as acceptance of the property.
If a family decides they want to get rid of a timeshare instead of passing it on to their heirs, some companies do allow owners a “buy out” opportunity. In other cases, owners must sell the timeshare to someone else or work with a timeshare exit company that specializes in getting out of timeshare contracts.
2. Vacation Property Divided Among Siblings
Perhaps a beloved vacation home served the family well during the golden years. Once siblings must share the responsibility of owning and maintaining such property, relationships can go sour. There could be arguments about how often which family uses it, how to split expenses and repair, whether they should sell and split the value or keep it. One sibling’s family may live far from the vacation spot and have no interest in using it. If they want the others to buy them out, there may be disagreement on value.
Even if the siblings do manage to stay on good terms, there are practical considerations such as whether the heirs can afford the property taxes, maintenance, insurance, remaining mortgage, and any management fees. These costs might outweigh the value of the property to the heirs if it poses a longer-term financial burden.
Estate advisors recommend that families agree during the planning process whether the heirs will want to share the property for use. A co-tenancy after death agreement can lay out the rights and responsibilities of each heir after your passing. Or perhaps the disagreements while parents are still alive will prove that selling is a better path.
Collectibles can be anything from rare stamps, art, or coins to musical instruments and antique dolls. Sometimes they are high value and other times not. As the asset owner, you may not even have an accurate picture of the collection’s worth unless you’ve done research or had an expert appraisal. Be sure that you document the worth of collectibles for your heirs so they don’t inadvertently discard something they think is worthless. Also, collectibles can be tough to value. Make sure you advise a reputable person or company they can deal with to obtain current value rather than getting taken for a ride by the closest dealer.
Talk over what you plan to leave to your heirs while the opportunity is present. You may find their input leads to better decisions about personal and real property while you’re still around.
Real Estate Term of the Week
Personal vs. Real Property: The law makes a clear distinction between real property and personal property. Real property is immovable. It includes the land, everything that is permanently attached to it (such as a house), and the rights that “run with” the land. Personal property, on the other hand, is movable, and includes everything not attached to real estate, such as clothing, furniture, cars, and boats.