Ever wondered what happens to frequent flyer points in a divorce settlement?
When going through a divorce settlement, discussions are mainly based on the division of marital assets. Many couples will find themselves negotiating the division of real estate, motor vehicles, shares, cash, and even rather unique assets such as antique jewellery and wine collections.
With so much to discuss, it’s easy for trivial things such as frequent flyer points, for example, to fly under the radar, and who cares, right?. It’s rather odd to imagine someone taking a strong stance over something many people don’t even realise counts as an asset.
Nonetheless, something which comes as a surprise to many is that frequent flyer points are an asset under family law proceedings and can be included as part of a person’s assets, even if not transferable.
|What Is An Asset?
An asset is anything of value or a resource of value that can be converted into cash. An asset can often generate cash flows in the future, such as a piece of machinery, a financial security, or a patent. Personal assets may include a house, car, investments, artwork, or home goods.
Discussions over the distribution of frequent flyer points in divorce settlements are real and occurred recently in a case at our firm dealing with a couple who have contributed thousands of dollars worth of purchases towards the points over their marriage years. These are points that can go towards some lovely first-class tickets and hotel check-ins!
So now the main question – who gets the frequent-flyer points in a divorce settlement?
Terms and Conditions
The first step in deciding what happens to the frequent-flyer points in a divroce settlement would be to check the airline’s terms and conditions. For example, the Qantas program rules state that the points belong to the person who earned them. Although family members can transfer these points between one another, there is no rule or precedent on dealing with rewards points in a divorce.
However, these rules differ between rewards programs. Take the Marriott, for example. The loyalty program’s terms and conditions expressly state that the company may allow unredeemed points to be transferred from one member to another in the event of a member’s adjudicated divorce settlement.
Depending on whether or not the company allows it, you may be able to ask the airline or any other reward-granting program to divide the points between two accounts equally. It is crucial to keep in mind that companies often charge a small fee when requesting a transfer or division of rewards points. It is best practice to organise the handling of such payments before going ahead.
Estimate the Value
Now, in the case where the points cannot be transferred, rather than going through the hassle of a court order, your next option would be to estimate the value of your portion of the points. In assigning a value to the points, your ex-partner will be able to retain the points while you make a greater claim on another asset to the value of your share.
For example, if you have contributed $20,000 worth of points to your former partner’s membership, you may be able to negotiate to receive $20,000 through another asset such as shares or property.
This may not be as simple as it sounds, and estimating the monetary value of reward program points is a task that judges have struggled to agree on. While some programs may offer a cash equivalent for their points, this is an infrequent scenario, leaving you the option of roughly converting the value of your share.
For example, if an airline requires 50,000 bonus miles to be redeemed for a first-class ticket that would cost $1500, you can reasonably estimate $1500 as the cash value of the 50,000 miles. Nonetheless, estimating the value of rewards points may not always be as straightforward. Points often carry varying weights depending on the type of tickets purchased, the destination, and the time of year. In this case, your best option is to do your research and present it with a value that is both reasonable and defensible.
Can The Frequent Flyer Points Be Used Before The Divorce Is Finalised?
Using or giving away points to reduce the asset pool before finalising the divorce is an issue in itself, and disposing of assets before divorce is something that we often get inquiries about at our office. Although this is an extensive topic that requires an article on its own, here is an insight into a few methods which the court considers when dealing with the dissipation of assets.
Notional property refers to property that is either not in existence or cannot be quantified. This may be the case where one party has unilaterally disposed of an asset. Before the High Court’s decision in Stanford (2012), property that was deliberately/recklessly wasted could be ‘added back’ into the parties’ pool of assets. In these circumstances, the party at fault may receive less of the remaining assets available for division.
However, family law courts are now much more reluctant to consider add-backs after the High Court rules that only existing legal and equitable interests in the property should be identified for property settlement purposes. Although later cases have shown that add-backs are still possible, they rarely occur and require exceptional circumstances.
In situations where the add back method cannot be applied, courts can still exercise their discretion under section 75(2) of the Family Law Act (1975), which lists several factors that the court has to consider when deciding how to distribute property. This may include the deliberate or reckless waste of property, which may impact the court’s decision concerning making orders that are just and equitable.
In some cases, the court may exercise discretion to make a freezing order, with or without notice to the respondent. A freezing order stops a person from disposing of or dealing with an asset. This injunction will remain in place until the next court hearing when the respondent has an opportunity to be heard.
Let Us Answer Your Questions About Divorce and Family Law
If you’re seeking help with the division of frequent flyer points or any other assets during a divorce or any family law matter, it’s time to find a reliable and experienced family lawyer.
Here at JB Solicitors, when possible, we try to achieve the best possible settlement without litigation. When an agreement isn’t possible, we’re here to discuss how to move forward confidentially.
Family law proceedings are difficult for all parties involved. If you need advice regarding a family law matter or would like additional information regarding the division of assets, please contact our firm today.
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