A guide to your miles and points in death and divorce.
Who gets the miles?
When life or love ends, there are always questions. And increasingly, those questions involve miles and points.
With over 9 trillion unredeemed miles out there, it's not surprising that the wealth accumulated in frequent flyer accounts has become a bone of contention in divorce and probate courts.
No one goes into a marriage intending to divorce, and certainly no one likes to think about dying, but we are, after all, heir a thousand natural heartaches, and a little planning and awareness can certainly ease that pain.
Nearly all of the major North American programs offer some means of transferring or using the miles of the departed. But as you might expect, those means vary significantly. Fees, documentation, even requirements as to whether or not the miles were specifically referenced in a will -- vary by airline.
Despite the variations in methods, though, there are almost always ways to get the transfer done, and in most cases, survivors have been pleased by the airlines' efforts.
Take the case of Arlene Harris of New York City, who was widowed in February of last year.
She and her husband both had accounts with a number of airlines -- America West, American, British Airways and Delta. Her husband had a considerable sum of miles built up -- somewhere in the neighborhood of 200,000.
When the time came, she got to work, calling each of the airlines and requesting the transfer.
"American charged $50, but there was no problem -- they were just great," she said. "And Delta was fine, Delta was just great -- they really were."
Few programs in the U.S. allow mileage pooling -- that is, the ability for two members to effectively share their accounts. British Airways does, which makes things much easier for survivors. "With British we had a family account, and I just notified them that he had passed away, and just converted the account to my name," said Arlene.
Interestingly, the only snag she found was with America West. In that case, though the bulk of her husband's miles were transferred without question, a small percentage -- 2,500 miles, to be exact -- were never transferred. The airline said those miles came from her husband's successful application for an affinity credit card, and refused to hand them over.
What was frustrating, Arlene says, was that those miles had been earned years previously, and her husband had more than made up for them in award spending.
The airline wouldn't budge, however.
"I'm a terrible spendthrift, but I hate feeling ripped off," she said. "I know it's just 2,500 miles, but I thought it was tacky."
Other consumers, while generally pleased with the results of their transfer efforts, have started to run into another obstacle: processing fees.
Not all airlines require a fee, and many will waive it under the right circumstances, but the $50-plus fees charged by some programs are simply too high for some members.
Carolyn Voegtlin of Chicago is facing the fee quandary now. She's in the process of transferring her deceased father's United Mileage Plus miles into her mother's account. With Mileage Plus, that transfer requires $75.
"I am paying the fee but protesting," she says. "They should take into consideration that she is an 82-year-old widow on a fixed income and that $75 is too high in her circumstances."
In Carolyn's case, her father's account has about 25,000 miles -- not a mileage fortune, to be sure, but enough for a free domestic ticket. With larger accounts -- accounts that hold hundreds of thousands, if not millions of miles -- a double-digit fee might seem more reasonable.
Fees aside, there are a few steps individuals can take to smooth out the transfer process.
First and foremost, accurate and accessible record keeping is a must. Arlene Harris understands the importance of detail, particularly after her own experience. "I'm very cautious. I want my kids to have those miles, so I keep very clear records."
When planning their estates, members should indeed list their miles in a will, and specify how they would like them to be dispersed.
Also, it is probably best to name just one beneficiary. When programs allow the transfer of miles or points, they may well be bending their own rules. It's easier, and the chances for success are much higher, if there is only one party to whom the transfer can be made.
In some cases, in fact, the difference between a single beneficiary and multiple beneficiaries can mean the difference between keeping miles active and being forced to cash them out.
According to United, for example, "If there are multiple beneficiaries, the mileage will be transferred into the account of the executor or personal representative of the estate, and they will assume responsibility for ordering award certificates for the beneficiaries."
Not surprisingly, because of all the complications and fees involved in the transfer of miles upon death, many simply assume the role of the deceased for the purpose of cashing in awards. Often a survivor will have access to the deceased's frequent flyer number and pin and will just use the remaining miles to issue tickets in whatever name they see fit. This is a popular method used to bequeath awards to charitable organizations.
This is, of course, against the rules. All airlines make a specific point in their terms and conditions that accounts belong solely to an individual, and that any attempt to "infiltrate" that member's account by another party is taboo.
The obvious response is "How are they going to catch me?"
They may not. We are not aware of any cases in which an "identity-assumer" has been nabbed.
But the fact remains that this approach runs contrary to the spirit of the programs, and since there are "lawful" means of transferring these miles, the risks involved may not be worth it.
It would be unfortunate to compound the loss of a loved one with the loss of his or her miles.
As with death, divorce laws vary considerably by state. There is no single rule of thumb regarding the disposition of miles.
As a general rule, any interest that may be considered "property" is subject to division, and therein lies the rub: Are frequent flyer miles property?
As of yet, no court has been willing to make that declaration outright. Two cases on record, one in Colorado and one in Florida, have treated miles as a marital asset without specifically declaring them property. In two other cases, one in New Mexico and one in Tennessee, the courts have divided miles between parties, a division that was not questioned on appeal.
Yet in Washington, in 1999, an appellate court specifically declared miles to be separate property, thus avoiding the division question entirely.
One of the keys to determining whether something constitutes property is the concept of transferability. Rarely will a property interest be found if the owner cannot transfer an asset to another.
In some cases, the courts have left it at that: Since, under the rules of most programs, transfers are not allowed, no property interest exists. A few clever attorneys, however, have suggested that miles are indeed transferable, regardless of what the rules say. There is, after all, an active black market in mile brokerage, with a number of Web sites devoted to that purpose.
"A lively market for the sale, exchange and barter of (miles) has existed for a number of years," explains attorney Barry Roberts. "(Members) consider their mileage credits to be an asset that can be sold, bartered or exchanged in a free market just like any other asset."
The drawback to this argument is that a black market does not necessarily constitute an "open" market. A court would probably be reluctant to attach a value to a commodity -- in this case, miles -- when the only means of determining that value is illegitimate.
Nevertheless, a divorcing spouse can try to make the case. If a valid third-party estimate of the value of miles can be attained, it's likely the court would consider a division.
The problem is that establishing a value is tricky at best. Three cases, one in Florida and two in Virginia, simply rejected a monetary award in lieu of miles because no evidence of value had been presented. Legal experts suggest that that evidence is unlikely to arise anytime soon. Brett R. Turner, the author of numerous articles on the subject, says, "It is probably not possible to value frequent flyer miles with sufficient accuracy to permit an offsetting award."
Some courts have indeed placed a value on miles, using the familiar "two-cent" rule (the cost of a domestic ticket -- $500, divided by the number of miles required to earn that ticket -- 25,000).
Of course, that assumes that the "two-cent" valuation is valid. As most frequent flyers know, however, it's not always the best way to estimate value. Two individuals, given the same number of miles in the same program, can come up with a variety of award options, some of which are clearly more valuable than others. Value is entirely subjective.
In the absence of any clear, fair way to value frequent flyer miles, some have suggested the only equitable means of division is to simply split the miles. But, the program itself may not be willing to play along. In the absence of a court order, not every program will simply set up a new account. Take these unambiguous words from the Hilton HHonors terms and conditions: "Accrued points do not constitute the property of the member, and are not transferable in the event of death, divorce or operation of law."
In that case, the division needs to be done "indirectly" -- that is, strictly between the parties. Under a written agreement, the mileage owner will, over time, dole out awards in the other party's name.
In the case of a hostile divorce, such a division is unlikely. In a more amicable situation, however, and with the help of good record keeping, such splits have been and continue to be made.
Solutions are really only as limited as the willingness of the parties.
Consider the case of Bob Schutzenbach of East Northpoint, N.Y.
Prior to his divorce, Bob had participated in the now-famous Latin Pass million-mile mileage run. Not surprisingly, then, his abundant bank of miles and points came up during his divorce. Faced with valuation difficulties, both sides came up with a novel plan.
"What we finally settled on, and this is actually in the written agreement, is that I had to give her enough points for a week in the Caribbean with Hilton," said Bob.
"Hilton required a copy of the divorce agreement, then split the points into two accounts, and transferred the miles over. They were very efficient; they just assigned a new account number. It was really a piece of cake."
The amicability of Bob's divorce may not have been the norm, but the creative use of his points has helped maintain a civil post-marital relationship. Since the split, he has voluntarily used his mileage bank to send his "ex" and their children on vacations.
"Let's face it," he says, "you can buy some good will. It's basically free, and can benefit the kids anyway, and it's certainly a good way to negotiate -- 'You know what? I'll throw in a couple weeks wherever you want to go.'"
All this talk of "assets," "rights," and "valuation" begs the question: "Whose miles are they, anyway?"
The fact is that, though members often feel like their miles are individual property, the programs' terms and conditions are quite clear: the miles are an intangible currency that belongs solely to the program.
Of course, a good case can be made that a property right does exist -- witness the case of a few Delta flyers whose miles were confiscated by the program for violations of program rules. Their attorney is quite specifically calling those miles a property right, and it doesn't hurt his case that in cases of death and divorce, the airlines treat them as such.
But there's danger here.
As it stands, the Internal Revenue Service has said it has no interest in pursuing the taxation of miles at this time. If, however, the courts begin to create clear rules about the valuation of miles, it is not unforeseeable that this newfound property would be taxed.
Furthermore, when an airline offers to transfer miles in the case of death or divorce, they are, in essence, doing their customer a favor. If push comes to shove, it's plausible that they could alter their rules to keep their liability low.
Which in turn illustrates the most important point of all (and one veteran flyers know all to well): You can catch more flies with honey than with vinegar.
Your approach, and your value to the program, can make all the difference. Airlines and hotels have rules, and when cornered, will happily roll out all the fine print you could ever want. "Policies," on the other hand, tend to be a little more flexible.
Witness Bob Schutzenbach and Hilton. Though Hilton's rules make it abundantly clear that miles will not be transferred in the event of a divorce, Bob -- a longtime, active member of HHonors -- found a way.
Flexibility comes with a price. If you're a valuable customer, and your approach is civil and friendly, you just might be surprised at how flexible these programs can be.
The Legal Fine Print
(Special thanks to longtime reader Morty Herman for the following contribution)
Some elect to include a codicil (an addendum) to an existing last will and testament, though this often requires the assistance of an attorney. An easier solution might be to include this sample paragraph along with your will or, if no will is intended, this paragraph could be used if it is signed, dated and witnessed and kept with your personal papers:
"Upon my death I leave all my airline and hotel frequent flyer miles and/or points in my accounts to my (relationship), (name)."
The use of this paragraph will leave no question as to your wishes for your miles and points. But as you'll note below, many of the airlines don't really require mention of miles and points in your will. While these same programs are constantly changing their rules with regard to leaving miles to heirs and beneficiaries, the following rules from select programs will give you an idea what to expect (though it's always wise to check their current rules).
Mileage does not need to be specified in the will but American does require a copy of the pages, which identify the decedent's name, the executor's or personal representative's name, and a page showing the date of execution and signature of the maker. If the AAdvantage account is specifically mentioned, a copy of that page must be included as well. If the AAdvantage account has less than 10,000 miles, only proof of death is required; if more than 10,000 miles -- a transfer fee of $50 will be charged.
Transfer to a surviving spouse or a named beneficiary may be done provided the inheritor is also a OnePass program member at the time of the account member's death. The account does not need to be mentioned in the will, but Continental does require a copy of the death certificate and a testimentary letter appointing the executor who authorizes the transfer of miles to the inheriting member. Continental charges no fee for the transfer.
Mileage does not need to be specified in the will but Delta does require a copy of the will if the beneficiary is not the spouse. If there is more than one heir, and the account is not specifically assigned to any one heir, a letter from all the heirs is needed to assign the account to any one of them. Delta charges no fee for the transfer.