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for Texas Professionals REWARDS FROM THE GRAVE: KEEPING LOYALTY PROGRAM BENEFITS IN THE FAMILY In today’s highly competitive business environment, there are numerous options for customers to make the most of their travel and spending habits, especially if they are loyal to particular providers. Airlines have created programs in which frequent flyers accumulate “miles” or “points” they may use towards free or discounted trips. Some credit card companies offer users an opportunity to earn “cash back” on their purchases or accumulate “points” which the card holder may then use for discounted merchandise, travel, or services. Retail stores often allow shoppers to accumulate benefits including discounts and credit vouchers. Some members of these programs accumulate a staggering amount of points or miles and then die without having “spent” them. For example, there are reports that “members of frequent-flyer programs are holding at least 3.5 trillion in unused miles.” Managing Your Frequent-Flyer Miles, http://www.groco.com/readingroom/fin_frequentflyer.aspx (last visited June 19, 2011). What happens to these accumulations of miles and reward points after the member of the program dies? Do they just disappear? Can these benefits be transferred upon death by will or could they pass by intestacy? Are they instead nonprobate assets governed by the terms of the contract between the company and the customer? Each program is different and has varying rules, both formal and informal, regarding the transfer of benefits upon the death of the program member. This article outlines some of the most popular frequent flyer and other loyalty program rules for the transfer of points, rewards, miles, and other benefits. After reviewing the basics for transferring benefits in these programs, the article provides some advice for members and their advisors to use to make sure their accrued points and miles do not disappear after death.
I. FREQUENT FLYER PROGRAMS Most airlines have created loyalty programs to reward fliers who use their airlines or partners. These partners may be noncompetitive airlines or other businesses ranging from those that are travel-related (e.g., automobile rentals) to those which have no connection with the travel industry (e.g., florists and cable television providers). Several of the more popular of these programs are reviewed in this section. A. American Airlines
The American Airlines AAdvantage Program offers an opportunity for individuals to accumulate miles when they choose to fly on American Airlines and other partner airlines, as well as when they make use of non-airline participating businesses. These miles may be used on flights to over 900 worldwide destinations, flight upgrades, vacation packages,
Gerry W. Beyer Governor Preston E. Smith Regents Professor of Law Texas Tech University School of Law Lubbock, Texas Mikela Bryant Comment Editor Estate Planning and Community Property Law Journal Texas Tech University School of Law
hotels, car rentals and numerous other travel-related products.http://www.aa.com/i18n/AAdvantage/programInformation/ma in.jsp?from=Nav. Under normal circumstances, miles accrued by a participating member of the AAdvantage program may not transferred to other AAdvantage members, their estates, successors and assigns upon the death of the participating member. However, these rules are not set in stone. http://www.aa.com/i18n/AAdvantage/programInformation/ter msConditions.jsp. Upon death, a participating AAdvantage member may be allowed to transfer his or her accumulated mileage credit to persons named specifically in a court-approved will or estate plan. American Airlines reserves sole discretion for allowing such a transfer to occur. Typically, American must be satisfied that will is valid and requires the payment of applicable transfer fees. For this type of transfer to occur, American Airlines must receive copies of all documents regarding the death of the member, the will or estate plan bequeathing the miles, and the AAdvantage account to receive the transfer—if such an account is specifically mentioned. The required documentation depends on the amount of miles bequeathed and the wording of the document. http://www.aa.com/i18n/AAdvantage/programInformation/ter msConditions.jsp; Inheriting Miles: Airline Rules and Procedures, Airfarewatchdog.com, available at http://i.slimg.com/sc/aw/graphic/i/in/inheriting-milesairfarewatchdog.pdf (hereinafter Inheriting Miles). The cost to transfer the accrued miles posthumously is less than normal transfer fees among living parties. Inheriting Miles. “Gifting” 1,000 miles to another AAdvantage account costs $27.50, while “sharing” miles between accounts has a fee of $50.00 for 1,000 to 5,000 miles, increasing in increments of $50.00 for every 5,000 mile range increase until the maximum transfer of 25,000 miles is reached. https://transfer.points.com/AAdvantage/init.do?method=transfer. According to the Airfarewatchdog chart, these fees may be reduced at the discretion of American Airlines to as little as $50.00 for more than 10,000 miles. Inheriting Miles. Points transferred or “gifted” are usually limited to 60,000 points per calendar year. https://transfer.points.com/AAdvantage/help.jsp. The amount of points, circumstances of the transfer, and mood of the American Airlines representative all pay a large factor in the fee and outcome. B. United Airlines
United Airlines’ Mileage Plus Program, by specific language in the program’s terms and conditions, seems to prohibit any type
Electronic copy available at: http://ssrn.com/abstract=1881665
of transfer of accumulated mileage. Section 6 of the online terms and conditions states that “accrued mileage and certificates do not constitute property of the member [and n]either accrued mileage nor certificates are transferable (i) upon death.” http://www.united.com/page/article/0,6722,1155,00.html?navSource=MPFooter&link Title=C4.4. However, members of the Mileage Plus Program have two inter vivos options. Miles may be transferred from one member to up to three other members with the payment of a non-refundable fee of $0.015 per mile. There is a minimum mileage requirement of 2,000 miles per transfer recipient and the miles are transferred in increments of 1,000 miles. No member may receive more than 15,000 miles from any other member, and members are restricted to transferring 60,000 miles per calendar year. Transfer Miles Program Agreement, http://www.ualmiles.com/TMOrderAgreement.jsp. A Mileage Plus member also has the option of purchasing miles as a gift for family and friends. Gifted miles are not transferable and are limited to 60,000 miles per calendar year with a 2,000-mile minimum requirement per purchase. Give Miles Program Agreement, http://www.ualmiles.com/GM_OrderAgreement.jsp. Although the terms and conditions of the Mileage Plus Program, the Transfer Miles Program, and the Gift Miles Program do not include stipulations regarding an option for transfer following the death of a member, all hope is not lost. According to Airwatchdog.com, miles may be transferred between a deceased member and a named beneficiary for a $75.00 fee if the executor of the estate contacts the United Airlines’ customer service center and requests a form to begin such transfer. The process requires submittal of the completed form, a death certificate, and proof of the identity of the intended beneficiary to the customer service center. There are no restrictions on the maximum number of miles that can be transferred in this case. Inheriting Miles. C. Continental
Continental Airlines uses a program called OnePass to allow members to accumulate certain rewards for flights, hotel stays, and other purchases at participating businesses. When a OnePass member dies, his or her accumulated mileage and points may be transferred to the surviving spouse or a beneficiary named in a will. Ask Alex: Virtual Expert, CONTINENTAL AIRLINES¸ available at https://www.continental.com/alex/Agent.aspx. According to the OnePass Service Center, OnePass miles and points may be transferred to the beneficiary of the will with the submittal of a copy of the death certificate and letters testamentary. When there is no will, the transfer cannot occur without submitting a copy of the member’s death certificate, account numbers for both the deceased member and beneficiary member, and a notarized Indemnification and Hold Harmless agreement, which can be requested via telephone or email from the OnePass Service Center. E-mail from Patricia Brackins, OnePass Customer Service Manager, to Lauren Mikela Bryant, (May 24, 2011); Inheriting Miles. D. Southwest Airlines
Southwest Airlines’ newly reorganized rewards program, Rapid Rewards, does not allow transfer of a member’s accumulated benefits from one member’s account, living or deceased, to another’s for any purpose, nor may they be transferred from a member’s estate. A member’s account remains open, regardless of biological life, as long as the account is active. Once the account becomes inactive, the member’s points are canceled. Program Terms and Conditions, What are the Rapid Rewards Terms and Conditions?, SOUTHWEST.COM, available at https://www.southwest.com/html/customerservice/faqs.html?topic=rapid_rewards_program_terms_and_conditions (click “What are the Rapid Rewards Terms and Conditions?”) (last visited May 19, 2011). Any standard rewards, e.g., points currently existing under the newly reorganized Rapid Rewards program, standard rewards and existing rewards tickets, may be used by anyone after the member’s death, whether stated in a will or not. All credits existing under the old Rapid Rewards program expire after the member’s death and may not be transferred or used.
Telephone conversation with Rapid Rewards Customer Relations Representative (May 27, 2011). E. International Airlines
International airlines have a wide range of formal and informal policies regarding the use of benefits of their loyalty programs after a member’s death. A few of these programs are discussed below. 1. Air France
Air France’s rewards program, Flying Blue, cancels membership upon receipt of the member’s death certificate and does not allow transfer of accumulated miles from the deceased’s account. However, this policy has a significant loophole. If the intended beneficiary of the miles, or anyone else for that matter, knows the member’s account number for the Flying Blue program, he or she may be able to continue to accumulate and redeem points through online transactions long after the member has died, so long as the company has not received a death certificate. This activity is fraudulent and should not be condoned, despite its prevalence and apparent effectiveness. Flying Blue conditions, Air France, available at http://www.airfrance.us/US/en/common/transverse/footer/edito_fb_ffp.htm #1-general-information (last visited May 27, 2011). 2. Air New Zealand
Air New Zealand’s air miles program, Airpoints, offers complimentary membership to any customer flying business class on international flights. Frequent Flyer Benefits, Air New Zealand, available at http://www.airnewzealand.co.nz/frequent-flyer-benefits (last visited May 15, 2011). Airpoints membership terminates upon death. All points and miles accumulated, but not used upon death, are normally cancelled. However, the Airpoints program does allow for transfer of these miles or points after a member’s death depending on the country in which the member is registered and the type of points to be transferred. The key to transferring any points after death is making sure that the person to whom the points will be transferred is also a member of the Airpoints program. Airpoints Terms and Conditions, Air New Zealand, available at http://www.airnewzealand.co.nz/airpoints-terms-andconditions (last visited May 20, 2011). 3. Asia Miles
Asia Miles allows mile transfers through a will or other testamentary document as long as the transfer complies with living transfer requirements. The member may transfer the miles to any previously designated member of his or her Redemption Group, a group of up to five individual persons. A minimum of 10,000 miles must be transferred for an online fee of $170, or $250 if the transfer is made by mail or telephone. After the minimum mileage requirement is met, miles may be transferred in 5,000-mile blocks for a fee of $140 online or $200 using mail or telephone. Once transferred, the miles are good for three years from the date of the transfer. ASIA MILES MEMBERS’ GUIDE, Terms and Conditions, ASIA MILES, 14, April 1, 2011, available at http://downloads.asiamiles.com/pdf/programme/amonline_membersguide_e n.pdf (last visited May 27, 2011).
II. CREDIT CARDS, BANK CARDS AND BUSINESS LOYALTY PROGRAMS Many other businesses such as banks, credit card companies, and retail businesses also have different types of loyalty programs. Each program handles the transfer of accumulated benefits differently depending on the type of program and the requirements for membership. A sampling of these programs is provided below. A. Capital One Venture Card
The Capital One Venture Card allows a cardholder to earn two miles for every dollar he or she spends on purchases made using the card. If the cardholder spends $1,000 in the first ninety days card ownership, the member receives a one-time bonus of 10,000 miles. These miles can be spent on any type
Electronic copy available at: http://ssrn.com/abstract=1881665
of travel expense, such as airfare, hotel rooms, and car rentals. Venture Rewards Credit Card: Rewards, CapitalOne.com, available at http://www.capitalone.com/creditcards/venture-rewards-creditcard/rewards/?linkid=WWW_1010_CARD_TGUNS11_CP81022EF_C0 _02_T_CP81022ER (last visited May 20, 2011). Accumulated miles do not expire as long as the cardholder’s account remains open. A program member may designate a nominee or secondary cardholder with an option to access the card at any point during the life of the card. The person named as a nominee or secondary cardholder will have access to the card even after the death of the member, and be able to use the accumulated miles. Whether the cardholder can transfer benefits by will to another person not named as a nominee or secondary cardholder depends on the terms of the specific card. The cardholder may contact the Customer Relations Department to determine the best route to take with his or her specific card. Capital One Live Chat with Sylvia (May 26, 2011). B. Wells Fargo Business Check Card Rewards Program
The Wells Fargo Business Check Card Rewards program allows the current points balance of the account to be transferred to a new checking account if that account replaces the closed old account. Unredeemed rewards points are lost when the business account is closed or canceled and not replaced by a new account. WELLS FARGO, Wells Fargo Rewards for Business Debit Card Program: Program Terms and Conditions, 2, available at https://businesscheckcard.wellsfargorewards.com/wf/pdfs/BusinessFinal.pdf. C. Best Buy Reward Zone
Electronics giant Best Buy offers customers an opportunity to participate in a business loyalty program called Reward Zone, which allows members to earn one point for almost every dollar spent on qualifying purchases. For every 250 points the member earns, he or she will receive a $5 gift card. Accumulated points are not transferable from one account to another. Reward Zone Program Rules, BestBuy.com, http://my.rewardzone.bestbuy.com/rules (last visited May 26, 2011). When a member dies, current points may be redeemed by any party with access to the member’s online login information. The account may not be used by another person to accumulate more points. Because another person may not continue use of the account after the member’s death, the account becomes inactive. After one year of inactivity, an account is cancelled and any remaining points are forfeited. The account and unused points may not be passed by will to a named beneficiary. Telephone Interview with Sonya Mendoza, Best Buy Reward Zone Customer Service Representative (May 27, 2011). D. Amtrak Guest Rewards
The Amtrak Guest Rewards program is open to residents of the United States and Canada. Membership is available to individual persons only. Points may not be transferred to another person as the result of a member’s death or divorce. However, points may be transferred to another Amtrak Guest Rewards Member for a fee of $0.01 per point in 1,000 point increments. A member may not transfer more than 100,000 points in a calendar year. Once accrued points have been shared, they may not be transferred back to the original account holder unless payment for the transfer was never received. Amtrak Guest Rewards Program Terms & Conditions, https://www.amtrakguestrewards.com/info/terms (last modified March 30, 2011).
III. LOYALTY PROGRAM PLANNING A. Obtain Information From Client and About Benefits Programs
Preparing for the transfer of loyalty benefits hinges on the client’s
specific circumstances and the program involved. The estate planner should determine the following: 1. To what loyalty programs does the client belong? 2. Does the client have (or is likely to have) a sufficient accumulation of benefits to merit planning? 3. What is each program’s formal policy for the transfer of benefits when a member dies? 4. Does the program have an informal method for the transfer of benefits upon a member’s death? 5. Does the program have a policy for the transfer or gifting of miles or points during a member’s life which may be a better option than delaying a possible transfer until the client’s death? 6. Is the intended beneficiary a current member of the same program as the client? B. Drafting and Preparing the Transfer
The rules of the loyalty program to which the client belongs plays the key role in determining whether the accrued points may be transferred. Many customer loyalty programs do not allow transfer of accrued points upon death, but as long as the beneficiary knows the online login information of the member, it may be possible for the remaining benefits may be transferred or redeemed. However, some loyalty programs may view this redemption method as fraudulent or require that certain paperwork be filed before authorizing the redemption of remaining benefits. The drafting attorney should be aware of whether he or she even needs to include the method of point redemption in the estate plan. If the program allows anyone with access to the deceased member’s online account to redeem unused points, it is important that the intended recipient have all the information needed to make the transfer such as the account number, user name, and password. Not all is lost simply because a program’s terms and conditions state on paper or online that benefits may not be transferred by will or other estate planning technique. For example, some frequent flier programs, even ones stating that miles are nontransferable, may have informal policies which allow the transfer of miles after a program member’s death. Contacting the program’s customer service department is the best way to determine what steps to take to make sure accrued miles stay in the family. It may be advisable for this step to be taken before the client dies so that all necessary information and forms are available to complete the transfer after death. It is also important to know whether the program allows accrued miles or points to be transferred, shared, or gifted at any time during active membership. Program rules usually cover various methods a member may use to share or gift rewards to other members, or in some cases to buy rewards for non-members. These provisions offer the estate planning attorney methods of transferring unused rewards if the client is willing to part with the benefits during life. Numerous airlines allow testamentary transfer of accrued miles if the miles could have been transferred under the programs terms and conditions during the life of the member. The likelihood that a testamentary transfer will be successful increases significantly when the intended beneficiary of the transfer is a member of the same program. If membership is free, or even if there is a small fee involved, it may be in the best interest of the client for potential beneficiaries to become members of the programs from which the testator wants to transfer miles or points. Though many of these transfers require payment of a service or processing fee, the fee is a small price to pay for ensuring that the client’s wishes are met.
C. Monitor Loyalty Program Rules
Loyalty program rules often change. Thus, a dispositive plan, be it inter vivos or testamentary, may not work as intended. Accordingly, a regular review of loyalty program rules is necessary to make certain the client’s intent will be effectuated. The costs of conducting such a review must be balanced against the value of the benefits so that the expense of planning does not exceed the value of the benefits.
IV. CONCLUSION Frequent flyer miles and other reward program points are not considered the property of the program member by many companies who offer the programs, usually resulting in forfeiture of these points after the member has died. However, many rewards programs, whether airlines or businesses
offering consumer loyalty plans, offer many different methods which might ensure that a client’s accumulated miles or points do not disappear after his or her death. The estate-planning attorney should know the terms and conditions of the benefits program before drafting any type of estate plan to transfer the rewards. To ensure the testator’s wishes are sufficiently met, the attorney should review the formal polices which are often available on-line. The attorney may also wish to contact the customer service department of the program to learn about informal policies they may have regarding testamentary transfers. By doing so, the chances of the client’s rewards points or accumulated miles staying in the family or with other intended beneficiaries will be increased.
Frost specializes in private trust services and asset management. For more information, call: San Antonio Austin Boerne Corpus Christi Dallas Fort Worth Galveston Houston McAllen New Braunfels San Marcos
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This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. In publishing this article, neither the author, publisher, nor the sponsoring financial institution is engaged in rendering legal, accounting or other professional service. If legal advice is required, the service of a competent professional should be sought. Any opinions published herein are those of the author and do not necessarily represent those of the publisher or sponsoring financial institution.
© 2011 Gerry W. Beyer and Mikela Bryant
