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Dividing credit card rewards in a divorce

By  |  Published: December 4, 2015

Dividing credit card rewards in a divorce
Dividing credit card rewards in a divorce

When a married couple splits, dividing the credit card reward miles and points can become tricky.

Sometimes couples forget about them. They can be hard to value. Some programs won't let you divide them. And occasionally, one of the divorcing spouses will burn through them all -- sometimes with a new love interest -- as the marriage disintegrates.

With rewards programs so popular, divorce lawyers say divvying up points and miles should be a routine part of any divorce. That appears to be the case in Hollywood, at least. When Kris and Bruce Jenner divorced in 2014, the Los Angeles Times reported that they negotiated a settlement that addressed "their 17-year-old daughter's private school tuition and their frequent flier miles." Same with "Glee" star Jane Lynch, whose 2014 divorce settlement called for her and her ex to "split various bank accounts ($847,485), a 401(k) ($315,079), a tax refund ($56,810) and even their airline miles," according to Yahoo Celebrity.

Just because they can't get exchanged for cash doesn't mean they don't have value.

-- Stann W. Givens
Divorce lawyer

Although many separating couples divide reward points without incident, sometimes figuring out exactly how can lead to arguments. It's important to keep things in perspective. "People get really excited about them and get emotional about them as if it's really an important asset," says Leon Finkel, managing partner at Berger Schatz in Chicago, one of the country's largest matrimonial firms. "In a divorce situation, people fight about things because they are angry and emotional, not because it makes sense."

In reality, Finkel says, there are usually much bigger items to divide, such as a house. Compared to big-ticket items, points that might be worth just a few thousand dollars can seem inconsequential. "I charge $480 an hour for office time, so how much time do you want me to spend arguing over your points?" Finkel says.

That doesn't mean they're always worth ignoring, though. If you or your spouse has accumulated a large stash of points, you'll want to consider them in your settlement.

How points get divided
When a divorcing spouse goes to a divorce lawyer, the lawyer routinely requests all sorts of financial information from the couple, such as bank statements and credit card bills. Increasingly, that list of documents includes information about frequent flier programs.

Lawyers say that ordinarily, points and miles accumulated by each spouse over the course of a marriage are considered marital property and are split 50-50 during a divorce. Although states have different ways of dividing assets in a divorce -- through legal concepts known as either equitable distribution or community property -- there's usually a presumption that assets will be split fairly and evenly, including miles and points.

One major exception would be if the points are exclusively accumulated and spent by a business one of you owns. In that case, the points would not be considered a marital asset. But if you usually use the business's points for personal expenses, they probably would be considered a marital asset.

Dividing the points can be messier than, say, splitting up cash from a bank account. Some reward programs do not allow points to be transferred from one account to another, even in a divorce.

When the points and miles can't be neatly divided, some common options include:

  • Agreeing that each spouse can use half the points. This approach requires continued cooperation and contact after the divorce, so it might not be best for acrimonious splits.
  • Stipulating that the points will be used for the couple's children, such as getting a son or daughter back from college for the holidays.
  • Assigning a value to the points, then paying the other spouse half that value.

Determining the value can be tricky, however, since points can generally be used for all kinds of redemptions of different amounts. In addition, the fine print of most reward program rules say that points have no value. But lawyers say even though it might be difficult to determine the worth of points and miles, they are not worthless.

DIVORCE POINT-ERS

Divorce lawyers offer these pieces of advice for people about to divorce who are concerned with reward points and miles:

  • Be sure to mention them. There are lots of assets to split in a divorce, and reward programs sometimes get overlooked. If your spouse has a lot of points or frequent flier miles, mention that to your lawyer.
  • Don't sweat the small stuff. Don't get hung up on reward points and miles if there's not a lot to split.
  • Consider how to divide them. Assuming that your rewards and your spouse's are marital property, they will likely be divided 50-50. Transferring points so that they are divided equally is the easiest way, but not all programs allow this. Be prepared to assign a value to the rewards, or devise a structure in which each of you can use them.

Story continues below

DIVORCE POINT-ERS

Divorce lawyers offer these pieces of advice for people about to divorce who are concerned with reward points and miles:

  • Be sure to mention them. There are lots of assets to split in a divorce, and reward programs sometimes get overlooked. If your spouse has a lot of points or frequent flier miles, mention that to your lawyer.
  • Don't sweat the small stuff. Don't get hung up on reward points and miles if there's not a lot to split.
  • Consider how to divide them. Assuming that your rewards and your spouse's are marital property, they will likely be divided 50-50. Transferring points so that they are divided equally is the easiest way, but not all programs allow this. Be prepared to assign a value to the rewards, or devise a structure in which each of you can use them.

"Just because they can't get exchanged for cash doesn't mean they don't have value," says Stann W. Givens, a divorce lawyer in Tampa, Florida. "Most of the time, we can work out an agreement between the husband and wife as to what that is if, in fact, you can't work out dividing the points."

One place to start when considering point values is with the valuations published by bloggers such as The Points Guy, or those included in the Wallaby rewards app. You can adjust those valuations based on your own subjective criteria.

Tread carefully pre-divorce
If you think your marriage is headed toward divorce and you have a lot of reward points, there's no surefire way to protect them from your soon-to-be ex-spouse, lawyers say.

Sure, you could spend them, so that when one of you files for divorce, there are fewer points to divide. But lawyers caution that divorce judges can take a dim view of a spouse who squanders marital assets for personal advantage, under a legal doctrine knows as "dissipation." The divorce settlement could factor in a wasteful use of miles or points.

"If you go find a girlfriend and climb into the back seat of a car every Thursday, the judge doesn't care," Givens says. "But if you go to Tahiti with that girlfriend and spend $10,000 of marital money, the judge cares."

The same principle applies for using reward points, he says.

Many times, though, points and miles balances are simply too small for divorcing couples to worry about. There's no consensus on when it makes sense to include reward points in a divorce settlement, but if there's is a substantial value -- say, they're worth at least a couple plane tickets -- it could be worth pursuing.

"It doesn't make sense to squabble over point balances that are in the couple thousands," says Lili Vasileff, a certified divorce financial analyst in Greenwich, Connecticut. "It's important to recognize that there's a threshold that it doesn't make any sense to go after if it's minuscule."

Although divorcing couples sometimes argue over how to divide rewards, most figure it out without incident.

Sometimes, having those rewards can come in handy after a divorce. Vasileff says one of her clients, stressed out from the disintegration of her marriage, used points from her ex-husband for a spa getaway.

"She said, 'I need this. I'm going away for myself,'" Vasileff recalls. "And it was lovely."

See related: Forgotten card leads to post-divorce strife, Don't ignore divorce decree debt mandate, Debt and divorce: 5 steps to make a clean credit split

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Updated: 05-24-2017

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