Indiana statutes treat the marital estate (assets and debts of the married couple, not just the residence) as all marital property and/or marital obligations. This means that assets, even credit card points, like “frequent flyer miles,” which many people overlook, may be subject to division in a divorce. While you might (and should) be focused on more substantial assets (or debts) such as: the house (marital residence) or retirement accounts, miles and other rewards sitting in a digital account can hold value that must be addressed and ultimately distributed among the divorcing parties.
The invisible value in your pocket
Many people assume, wrongly, that because loyalty and other credit card points are non-transferable or have no “cash value” according to the airline, they are not property. However, these rewards could represent a significant financial investment made with marital funds or time. If one spouse earned these points while traveling for work during the marriage, the other spouse will have a claim to that value, for it at least to be considered in the marital estate.
Many digital rewards carry an estimated value that can be measured during the discovery phase of a divorce.
- Frequent flyer miles and airline travel credits
- Hotel loyalty points
- Credit card cash-back balances and rewards
These items may be used for family vacations or business travel, making them a valuable part of your established lifestyle.
Balancing the digital scales
According to Indiana law, an equal distribution of all marital property is deemed reasonable and just. However, trying to actually divide points equally can be a nightmare (or not possible) because airlines may charge high fees to transfer or deny transfer of miles between accounts.
A more effective solution may be “offset accounting.” Indeed, offsetting is often the preferred and more logical approach to much of the distribution. This is actually simple. For example, one spouse keeps the points (and the value associated with the points) and the other receives a different asset of relatively equal value (or takes less of a liability). To do this, you must first determine all values of assets and liability amounts of all debts. While valuation of credit card points fluctuates and vary based on program policies and redemption values, some sources estimate that points can be worth between one and two cents (or more) per point.
After assigning value, you can trade other marital assets to balance the division. For instance, if one spouse keeps $10,000.00 in points, the other might receive a $10,000.00 in additional funds from a bank account or in home equity. This preserves the traveler’s perks while ensuring the other spouse receives a corresponding financial offset.
Navigating digital assets requires a clear look at your total financial picture. By identifying these rewards/points early in the dissolution process, you ensure that the final division of property is truly fair. Protecting your future means accounting for every asset, even the ones that do not show up clearly, if at all, on a credit card statement.