In most cases, loyalty points will not be subject to the deemed disposition on death found in subsection 70(5) of the Income Tax Act (Canada) because they are unlikely to be capital property. There is no “enduring benefit” gained from collecting rewards points. Most loyalty programs are administered at the discretion of the business and may be unilaterally cancelled at any time. Moreover, loyalty plans, such as Air Miles, state in their terms and conditions that they have no monetary value. Aeroplan’s terms and conditions even specify that they cannot be willed.
Whether loyalty points can be transferred to a beneficiary will depend on the terms and conditions of the specific loyalty plan. According to the Air Miles website, the Air Miles of the deceased can be transferred to a beneficiary by providing Air Miles with a letter of instruction signed by the personal representative, the collector number of the deceased and proof of death. There is no fee indicated on the form provided. However, the Air Miles terms and conditions state that you may not “transfer, sell, exchange, give, charge or otherwise dispose of any Miles except in accordance with such conditions as [they] may prescribe from time to time and upon payment of such fees as [they] may impose from time to time.”
Aeroplan’s terms and conditions state that the miles are personal to the member and cannot be willed or otherwise transferred other than with the consent of Aeroplan. Aeroplan may, from time to time, in its sole discretion, allow members to transfer miles after death. Aeroplan’s current position is that miles can be transferred, without a fee, if they are provided with a copy of the death certificate and the section of the will that names the beneficiaries. It is interesting to note, however, that as recently as 2016, Aeroplan was charging a fee of $30 plus $0.01 per mile to transfer miles to a beneficiary.
One option to be considered when deciding what to do with unused loyalty points is a donation to charity. Aeroplan allows members to donate directly to charities from their website. The Canada Revenue Agency takes the position that reward points are property that may be the subject of a gift to a registered charity. The donation tax credit would be based on the fair market value of the property donated, to be determined at the time the points are gifted to the charity. Charitable donation of loyalty points may present valuation issues, however, if the points themselves are donated directly; oftentimes, the terms and conditions of a loyalty program specifically state that the points have no cash or monetary value, making it difficult to determine the fair market value of the points for purposes of the donation tax credit.
Depending on the program, it may be possible to transfer points to a family member or friend during your lifetime, but such transfers are often subject to a fee. Alternatively, it may be best to make a conscious effort to try to ensure that the points are used, perhaps to allow family members of the collector to visit in cases of illness.
Most loyalty programs are discretionary, with terms and conditions subject to change at any time, making planning difficult. Anyone intending to include loyalty points in their estate plan should carefully review the relevant terms and conditions and be willing to accept the risk that the program may change and the plan may not be carried out.