California is a community property state. During a divorce, California’s community property law requires a couple to craft a settlement dividing all assets and debts acquired during the marriage equally. If they are unable to negotiate a fair and equal division with the help of their Los Angeles divorce lawyers in order to sign a settlement agreement, then the matter goes to court and an impartial judge divides the marital property equally. With the exception of property and assets individually owned before the marriage and any individual gifts or inheritances acquired during the marriage, everything a couple accumulates during the marriage becomes community property subject to equal division, including credit card points.
While sometimes credit card reward points fall through the cracks during a settlement, in other cases they become a point of contentious dispute during settlement negotiations or may arise as an issue after a divorce if not addressed during the divorce process.
Many divorcing spouses ask their lawyers about their credit card rewards points and what happens to them during a divorce.
Learn What the Card Issuer Allows
Because any rewards points accumulated during the marriage belong to both parties in the marriage regardless of whose name is on the credit card or who used the card most, the points are subject to division by California divorce law. However, it’s important to read the fine print of your credit card terms. Some cards do not allow you to transfer points to another party, making it difficult to divide points in one name with the other spouse even when the law demands it. Plus, it’s important to note that cashing out points may involve a fine, fees, or lesser value.
In these cases, there are other ways to address credit card points during the division of property including the following:
- Determine a cash value of the total of the accumulated points and then offer a cash settlement for half of the total value to the other party in the divorce
- Determine the total cash value and keep the points by offering an asset of similar worth to the other party in exchange
- Transfer the points (if allowed under the terms of the card) to the other party in exchange for cash or an asset of equal value
- If you can use the points for hotel rooms, air miles, or other goods and services in someone else’s name you can offer to purchase these services for the other party using points until they’ve used their half of the points
An experienced family law attorney can help you navigate the complex laws regarding property division and rewards points during your divorce. Because not all rewards programs assign a cash value to points it can be difficult to determine their exact worth.
Is it Pointless to Divide Points?
Sometimes small issues like credit card points become an unfortunate bone of contention during the high emotions of a divorce and can cause some tense disputes between divorcing spouses. If there are many points adding up to an amount of significant value it may be worth the added legal fees of negotiating their division. In some cases, the total value of the points may not be enough to justify the additional billable hours for negotiating their division.
In these cases, it may be best to allow the points to remain with the card, so that each spouse keeps the cards in their names along with the amount in debt and rewards points on that card. This works well in cases where couples have more than one rewards card and similar amounts of debt and points on each card.
A skilled, experienced complex property division lawyer can help you determine the value of your credit card points in a divorce and whether or not they are subject to division under California’s community property laws.