Watch out for scams when trying to dump a timeshare

Dear Liz: How do I get out of a timeshare contract? A few years back, we signed up for one that’s associated with a major hotel chain. Promises were implied but not kept. Since then, I continually receive notices from legal groups that say all laws favor the timeshare developer and that my kids will take over my debt unless I pay the attorney thousands of dollars to get out of the contract.

Do you know of legitimate ways to sever the ties? I know I will lose my investment but would rather be out of the contract “for eternity.”

Answer: Timeshares typically include “in perpetuity” clauses meant to keep owners on the hook indefinitely for annual maintenance fees and other charges.

That doesn’t mean their heirs have to be on the hook, however. Your kids can “disclaim” — essentially, refuse to inherit — the timeshare on your death, as long as you haven’t put their names on the deed.

If you’re not happy with your timeshare, though, consider getting rid of it before your death. Check to see if the developer will take it back or if you can sell it on a site such as RedWeek or Timeshare Users Group. Don’t expect to get much, if any, money out of the deal. In fact, you may have to pay a year or two of maintenance fees in advance as a sweetener. That could be a relatively small price to get out of what otherwise might be a lifetime obligation.

It’s unfortunate that most timeshares don’t offer a simpler way out for owners. The difficulty in getting rid of timeshares opens the door for all kinds of scams and shady behavior, with companies charging thousands of dollars and often not delivering the exit they promise.

A gift annuity needs more thought

Dear Liz: I am 93 and caretaker of my developmentally disabled daughter, who is 64. She’s in poor health and lives with me but is still able to be fairly independent. I am in good health and still able to drive and so forth. Being newly widowed, I would like to increase my monthly income. I have a reverse mortgage on my home but need money for upkeep. Besides Social Security, I have a small savings account and an annuity payment of less than $500 a month. Do you think a gift annuity that pays 9.5% is a good option?

Answer: A charitable gift annuity typically requires that you give a charity a sizable sum of cash, securities or other assets in exchange for a partial tax deduction and a lifetime stream of income. The amount that’s paid out depends in large part on your age — the older you are, the bigger the payout since your life expectancy is shorter.

Gift annuities may be a good fit for affluent people with charitable intent who can use the tax deduction. From what you’ve written, that doesn’t seem to describe you. If you do have a sizable sum you can tap, it may be better to do so directly rather than involving a charity.

You could benefit from some objective guidance, not just for improving your own financial situation but to provide for your daughter. She may be in poor health, but she still could outlive you and almost certainly will need ongoing support. That probably will include a new place to live, because the reverse mortgage will have to be repaid at your death, and that typically means the sale of the home.

A fee-only financial planner can help review your situation and connect you with other experts, such as an estate planning attorney. You can get referrals from the National Assn. of Personal Financial Advisors at www.napfa.org and the Garrett Planning Network at www.garrettplanningnetwork.com.

Liz Weston, certified financial planner, is a personal finance columnist for NerdWallet. Questions may be sent to her at 3940 Laurel Canyon Blvd., No. 238, Studio City, CA 91604, or by using the “Contact” form at asklizweston.com. Distributed by No More Red Inc.

Liz Weston, certified financial planner, is a personal finance columnist for NerdWallet. Questions may be sent to her at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the “Contact” form at asklizweston.com. Distributed by No More Red Inc.