Wednesday, January 30, 2013

When someone passes away, usually their next of kin, agent or fiduciary will begin to compile a list of the decedent’s assets.  Rarely will such a list include the decedent’s frequent flyer miles.  However, depending upon how many miles have been accrued during the decedent’s life, frequent flyer miles can be worth hundreds, maybe even thousands, of dollars.  In such cases, heirs or beneficiaries of the decedent’s estate may wish to benefit from the value the decedent has amassed in frequent flyer miles.

Transferring Miles

Most airlines allow for mileage transfer among the living, but it is usually an expensive task to accomplish, often accompanied by fees and yearly limits.  The transferability of frequent flyer miles upon death is no more simple.  Susan Stellin, the author of a New York Times article entitled “The Afterlife of Your Frequent Flyer Miles,” stated “I asked six airlines if they allow transfers of frequent flyer miles after a member’s death and got a straight answer from only four.”

Most airline loyalty program policies claim that points accumulated are the property of the issuing company, giving them complete discretion as to how they are handled in the case of death.  For example, United’s Mileage Plus policy states: “[a]ccrued mileage and certificates do not constitute property of the member. Neither accrued mileage nor certificates are transferable (i) upon death, (ii) as part of a domestic relations matter, or (iii) otherwise by operation of law.”  Southwest Airlines has a strict policy that they do not transfer RapidRewards points once a member dies.

Such policy provisions, therefore, appear to provide that miles cannot be bequeathed to, or inherited from, another person.  Nevertheless, the formal policy found in an airline’s terms and conditions can vary considerably from what the airline’s customer service center will offer.  Policies differ from practices, so begin by calling the program’s service center to determine whether the miles can in fact be transferred or inherited.


For example, the terms and conditions of American’s Aadvantage program and Delta’s SkyMiles program provide that accrued mileage and award certificates are not transferrable at death.  Both airlines’ customer service departments, however, provide exception procedures. According to its website, American Airlines has the discretion to credit accrued mileage to persons specifically identified in court-approved wills upon receipt of documentation satisfactory to American Airlines and upon payment of any applicable fees.  Delta also allows for the Administrator or Executor of the Member’s Estate to request, via affidavit accompanied by a death certificate, to reinstate and transfer the Miles from the deceased Member’s account to one or more members’ accounts.

Getting Around Transferring Miles

In most cases, it is not the miles, but the award tickets the miles can purchase, that are important.  Fortunately, it is not difficult to have an award ticket issued in the name of a friend or family member.  Susan Stellin also suggests that “[o]ne way you can make things easier on your heirs is to leave a list of your frequent flier account numbers and passwords.” Doing this allows your loved ones to use your miles to issue tickets to themselves without having the hassle of fees and paperwork.

Updating Your Will

Last, do not leave it to the airlines’ “sole discretion” to honor your wishes.  People who have significant frequent flier miles should consider designating who gets their miles in a Will.  Questions have been raised concerning the taxability of frequent flyer miles, but according to Announcement 2002-18, the IRS has not pursued a tax enforcement program with respect to promotional benefits such a frequent flyer miles.  Therefore, there is likely no negative consequence to adding frequent flyer miles to your estate plan.

Tuesday, January 22, 2013

The Internal Revenue Service must have been kept as busy by the fiscal cliff in December as the rest of us were, because they never posted the January AFR on  They have, however, posted the February rates.  For February, the 7520 rate is increasing to 1.2%.

Thursday, January 10, 2013

The Illinois Appellate Court in In re Estate of Doman issued a ruling on October 11, 2012 that once more clarifies why it is important to have a Will and, depending on circumstances, potentially a revocable trust. (See our prior posts on Why Do I Need a Will? (Part 1 and Part 2) and Why Do I Need a Trust?)

Trial Court Proceedings:

In the Doman case, Sara and Mark Doman were in the home stretch of their divorce when Mark died on July 4, 2011. On June 10, the trial court had issued a written dissolution judgment and reserved ruling on the ancillary issues, with a status hearing set for July 11. Sara’s attorney called the court on July 5 to inform the trial court of Mark’s death and the trial court entered a docket entry that stated, “Cause set for 7/11/11 is vacated. Cause is dismissed.”

Probate Court Proceedings:

On September 28, 2011, Sara filed a petition in the probate court stating that their divorce proceedings were dismissed and that she was Mark’s surviving spouse and seeking appointment as administrator of Mark’s estate. Sara’s daughter, Aimee (who was a child of Sara’s from a prior marriage whom Mark had legally adopted), filed a counter argument on October 13, arguing that the trial court’s June dissolution judgment on grounds only was a final judgment.

The probate court found the July 5 order only dismissed the ancillary issues, not the dissolution itself, and therefore, Sara was not Mark’s heir, appointing Aimee and her sister Bethany (also adopted by Mark) as co-administrators of Mark’s estate. Sara appealed. (more…)

Friday, January 4, 2013

Unless you have been living on a tropical island with no television, cell service, or internet for the past few days, you have probably heard that the Federal government passed a new law this week, averting the “fiscal cliff” by the skin of their teeth (well, at least with respect to tax reform, it remains to be seen what will happen with spending cuts). While there are many portions of the “American Taxpayer Relief Act of 2012” (the “2012 Act”) that may apply to you (for example, see our prior post on the effects of the 2012 Act on charitable gifting), our focus now is on how the new law affects your estate planning.

The New Law

Since 2001, the transfer tax laws have been in a state of flux, with ever-changing exemptions, rates, expirations and sunsets. Now, for the first time in over a decade, the 2012 Act finally makes “permanent” the estate, gift, and generation-skipping transfer tax laws. (I put the word permanent in quotation marks, because nothing prevents Congress from passing a new law tomorrow, which could change everything again.) (more…)

Thursday, January 3, 2013


Effective December 31, 2012, Congress passed The American Tax Relief Act of 2012 (the “Act”) to avoid the fiscal cliff and President Obama is expected to sign the bill into law.  The full text may be obtained by clicking here.  In a Chronicle of Philanthropy article (which may be obtained by clicking here), Doug Donovan writes that the Act may hurt charitable giving in light of the fact the Act “reinstates a provision eliminated in 2010 that reduces itemized deductions by 3 percent of the amount that household income exceeds $300,000.”  Mr. Donovan goes on to explain that “[w]rite-offs grow more limited the more taxable income a person has and could reduce the value of deductions by up to 80 percent for the highest-income taxpayers, according to the Tax Policy Center.” (more…)

Wednesday, January 2, 2013

In case you’re interested in reading all 157 pages, click here for the full text of the “American Taxpayer Relief Act of 2012”.

Wednesday, January 2, 2013

Effective December 31, 2012, Congress passed The American Tax Relief Act of 2012 which, in part, sets the following policies.  President Obama is expected to sign the bill into law, although he has not said when.  More detailed analysis of the new law to come.

Tax Policy:

· Marginal Rates: Permanent extension of current policy up to $400,000 for singles, $450,000 for married couples.

· Capital Gains & Dividends: Permanent: 15% top capital gains and dividends rate up to $400k (singles), $450k (married); 20% rate for both above threshold.

 · Death Tax: Permanent extension of current policy on portability and unification with a $5M exemption indexed for inflation and a 40% top rate.

· PEP & Pease: Permanent relief from PEP & Pease under $250,000 (single), $300,000 (married).

· AMT: Permanently index AMT for inflation.

· Tax Extenders: Adopts package reported by Finance Committee in 2012, with a 2 year extension through 2013.

· Temporary Payroll Tax Cut: Allowed to expire.

· Bonus Depreciation: 1 year extension of 50% Bonus Depreciation.

· Stimulus Tax Credits: 5 year extension.

· Deduction Cap: There is no cap on deductions.

Spending Policy

· Debt Limit: No increase in the debt limit — remains at $16.394 trillion.

· Sequester: sequester is turned off for two months and paid for with a reduction in discretionary spending cap for 2013 and 2014, and expanding eligibility for Roth conversion.

· CLASS Act: CLASS Act entitlement repealed.

· Doc Fix: 1 year extension paid for by reducing Medicare spending.

· Unemployment Insurance: 1 year extension of current extended weeks of UI.

· Farm Bill: Provides for a one year extension of the Food, Conservation and Energy Act of 2008 at no additional cost to the taxpayer.