Congratulations! You’ve found the love of your life, and now you want to marry that person. But before you tie the knot, there’s one last thing to do: Make sure you protect your credit card points. (Okay, maybe there are a few other things to do in between, but you get the gist!)
You may be thinking right now, “there are bigger fish to fry than my credit card points; who cares?” And you may be right in that there are many other things to sort out in your prenup – such as how assets are protected like the house and car, or if someone is entitled to receive alimony in the future. BUT–points can actually rack up to very high values, and assets are assets. We can’t talk about points without mentioning the points guy, and if you are a fan, then you probably know that credit card reward points are a big deal and should be protected! Plus, if you end up in a less-than-friendly divorce, you and your ex may be trying to account for every last dollar. Your best bet may be to put your credit card reward points in a prenup.
What is a prenup?
A prenuptial agreement is a binding contract that outlines the ownership of assets and debt and how you will deal with alimony in the event of a divorce. Yes, you can even include credit card reward points. A prenup also fosters communication and transparency and matches you and your fiancé’s financial and life goals. In many states, it may also cover other aspects of your relationship, such as infidelity clauses and pet ownership. A prenup is not only a legal document, but it is also an emotional one. What we mean by this is a prenup is the first concrete step you make as an engaged couple toward your future life together. You and your soon-to-be spouse will put your heads together to plan out your life!
What are credit card reward points and miles?
Credit card reward points and miles are perks offered to credit card holders for spending money. You earn credit card points for every dollar you spend on the credit card. When you earn credit card points or miles, they are stored on your credit card until you redeem them. Rewards points can be redeemed for travel and gift cards, as well as other types of rewards like cash back or statement credits. You can even give your points to charity! One of the most common ways people use credit card reward points is by redeeming them for travel, such as flights, hotels, cruises, and car rentals. For example, with Chase Sapphire Preferred Card, for every $1 spent on a travel-related purchase, you can earn 1-2 miles. A short flight costs about 10,000 miles.
Prenups and credit card reward points
Now, let’s get into the nitty-gritty. What happens to your credit card reward points when you get a divorce? There’s no short answer, so let’s dive in. Without a prenup, your state’s default divorce law will apply. We like to call it a “default prenup,” if you will. This “default prenup” is your state’s method of distributing assets and debt between a divorcing couple (along with other things like alimony, child custody, and child support).
Yes, your credit card reward points may be considered an asset, albeit unconventional. The typical assets handled in a divorce are things like real estate, bank accounts, retirement accounts, vehicles, artwork, jewelry, etc. In today’s digital age, things like crypto and NFTs are also considered assets, so it makes sense that credit card reward points are, as well! After all, points or miles can have a very high monetary value. We’d want to keep that free vacation to Greece, too!
So, let’s talk about what happens to your points or miles in a divorce. Well, for starters, it depends on what state you live in. There are two frameworks on property and debt division in the United States: community property and equitable distribution. There are forty-one states that follow the equitable distribution framework, and the rest are community property states.
In an equitable distribution state (all states besides Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin), the courts will split up your assets in a divorce in an “equitable” way, not necessarily a 50/50 split. Each equitable distribution state will abide by its own list of factors in determining how to divvy up your assets in an “equitable” way. These factors may include the length of the marriage, each spouse’s needs, the age and health of each spouse, and each spouse’s financial contributions, among many others. What does this mean for your credit card reward points? Well, your points may be treated like another asset (think real estate, car, jewelry) and be awarded based on your state’s equitable distribution factors. Your assigned divorce judge will have the discretion to apportion assets according to the factors and what is most “equitable.”
Now, let’s talk about the other framework for property and debt division in a divorce: community property. The states under this framework are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. “Community property” is simply the term used for the property acquired during the marriage and subject to division in the divorce. A judge will divide up community property 50/50. Property acquired prior to marriage is known as separate property and is generally not subject to division (with exceptions). So, what happens to credit card points in a community property state? It depends on when you accrued them! If you accrued them during the marriage, then the points may be given a dollar value based on the credit card conversion and apportioned accordingly. If you accrued them prior to the marriage, then they may be kept separate and not subject to division.
Why get a prenup?
We’re glad you asked! A prenup is not just for the wealthy anymore; they’re for everyone. Prenups can help you protect your assets, protect you from absorbing your partner’s debt, protect you from paying alimony, and more. And, of course, a prenup can help protect your points and miles! Not only is a prenup akin to “marriage insurance” because it protects you if things go south, but it is also an emotional document. It can help align you and your spouse on financial goals and keep expectations level. Maybe one spouse has an alarming amount of debt, but they plan to hide it. A prenup requires full financial disclosure, so hiding debt is a big no-no. This will really put everything on the table for you two as a couple.
It’s also important to understand that even if you don’t get a prenup, there is a “default prenup.” That’s right–there is state law (a.k.a. a default prenup), and it will determine what happens to your stuff the same exact way that a prenup would…except you have little say in what happens.
Prenups and credit card reward points
Now, let’s talk about credit card reward points and prenups. Can you put your credit card reward points in your prenup? The answer is yes. Prenups protect assets, and credit card reward points are considered an unconventional asset but an asset nonetheless. Typically in a divorce, there are more important things to figure out than who gets the credit card miles, such as who gets the house? Or is someone paying alimony? Or, even more importantly, what does child custody look like? But, depending on your level of commitment to the points, they may be contentious aspects of your divorce.
In your prenup, you can outline that all points owned before the marriage are separate property and not subject to division should you get a divorce. On the other hand, if you’re feeling generous, you can also decide that assets, such as credit card points, should be considered marital/community property and subject to division. This means that a court will have the final say on what happens to the points accrued during the course of the marriage (if you two can’t come to a decision).
The bottom line
Whether you are an avid points collector or you’ve never redeemed a single mile, it’s good to know where you stand as a couple on this topic. While points may not be the highest point of contention in every divorce, points and miles are still an asset that you may want to be protected. Or maybe not? Maybe you are very much in the mindset of “mi casa es su casa,” and you want to be able to share those points with your beau, even in a divorce. Either way, you have the option to protect those precious little points with a prenup.
HelloPrenup can help you create a prenup from the comfort of your couch! That’s right, with our interactive platform, you can walk through a questionnaire, financial disclosure, and negotiations with your partner and then download a completed prenup at the end! (After signatures and notary, of course!)
Nicole Sheehey is the Head of Legal Content at HelloPrenup, and an Illinois licensed attorney. She has a wealth of knowledge and experience when it comes to prenuptial agreements. Nicole has Juris Doctor from John Marshall Law School. She has a deep understanding of the legal and financial implications of prenuptial agreements, and enjoys writing and collaborating with other attorneys on the nuances of the law. Nicole is passionate about helping couples locate the information they need when it comes to prenuptial agreements. You can reach Nicole here: [email protected]