Most people have various credit cards and membership to organizations they use or frequent regularly. In other cases, they accumulate gift cards that are sitting unused. Some people may have several thousands of dollars in accumulated Air Miles, gift cards, loyal cards, etc. that their executor will have to deal with.
Below are a few tips for executors in dealing with the various cards and programs they may come across.
Credit cards
We often caution executors not to rush out and cancel credit cards right away. The executor should ask a couple of questions when they are dealing with a credit card:
• What are the autopayments that are currently on the card? Ask for a list and authorize which ones to continue and which ones to cancel.
• What are the points currently on the card — and how to get these paid out?
As nearly every credit card issued today enables the user to accumulate points, it is important to ask these questions. In some situations, we have heard that once someone has cancelled the card, you are not able to get the accumulated points. It therefore important to get the points paid out before cancelling.
Membership cards
One of the duties of an executor is to explore the various memberships that the deceased may have had.
For example, if the deceased was a member of Costco, Costco would require some documentation from the executor and then, once received, Costco would refund the annual fee and any value built up for executive members.
If the deceased was a member of BCAA, BCAA would provide a refund of the prorated portion of the membership fees paid from the date of death.
Other common memberships, such as credit unions and Co-op, have equity shares that can be cashed out when the executor submits appropriate documentation.
The job of the executor is to not only cancel the memberships but collect on any accumulated or prepaid amounts.
Physical card and electronic card
Gift cards can come in both a physical form and an electronic form.
The physical form of gift card is like an old physical stock certificate — when an executor finds it, they must determine if the card has value. Calling the issuer of the card is the easiest way to get confirmation.
It is far more difficult to deal with electronic gift cards as the executor may not even know of its existence. If you have a material amount on an electronic card, you may want to create a system that will enable your executor to deal with both physical and electronic gift cards.
Expiring gift cards and certificates
Gift cards that were issued before 2009 could expire, but most gift cards now are not allowed to have an expiry date. In 2016 this was outlined in the Prepaid Purchase Cards Regulation (Business Practices and Consumer Protection Act). In British Columbia, gift cards normally cannot expire.
There are a couple of exceptions that relate to cards received as part of a charitable event, prize, or promotional activity of the issuer. For example, a golf course giving out four free rounds of golf for a charity tournament. In these types of situations, the golf course could put an expiry date on the certificate because it was provided for a charitable purpose.
Another example may be a restaurant that is trying to promote itself providing a four-course dinner from a random draw. As the draw was essentially a prize that involved no cash value, the restaurant can put an expiry date on the certificate.
Mall cards
As noted above, legislation has been passed to ensure that gift cards cannot expire. Some exceptions apply, such as Mall Cards. Such cards enable an individual to purchase a card for the holder to shop at many stores within a shopping centre, and sometimes at others owned by the same company.
At Mayfair Mall in Victoria, for example, monthly maintenance fees in the amount of $2.50 apply starting 16 months after the purchase of the card.
Service cards
If you are purchasing cards for a specific service, they may have an expiry. Examples of service companies that may put an expiry on gift certificated are: haircut, massage, manicure, or pedicure services.
When you cancel or return a non-refundable good or service (such as a non-refundable plane ticket or piece of clothing), and the business gives you a store credit (or a voucher that is intended as credit) it is allowed to have an expiry date because it is not considered a gift card.
Unexpired cards
Other than a few exceptions noted above, most gift cards do not expire and are easily transferrable during your lifetime or upon death. Most cards are like cash in that whoever has the card can use it.
In some cases, people have transferred their cards onto an app so the physical card no longer has value. In these situations, unless the executor has access to the phone, and passwords, these values are often lost.
Taxable benefit
Many years ago, we remember it being uncertain whether or not Air Miles would be taxable. For example, an individual who travels frequently for work may accumulate significant number of miles that could then later be used for personal purposes. Even though the employer may be reimbursing the employee and are ultimately paying for the travel, the employee was accumulating Air Miles.
Was this a taxable benefit for the employee? CRA did come out and provide guidance and clarity: In this situation, it is not a taxable benefit.
Tax consequences on death
In addition, the Income Tax Act does not consider loyalty points to be a capital property that would be deemed to be disposed and loyalty points are generally considered to have no cash value. As a result, they will not generally be taxable on death.
Transferability
Your points may be transferred to the beneficiary on your account depending on the terms and conditions of the loyalty program (certain fees may apply) so someone you love can enjoy them.
Your points can also be donated for a tax credit. It gets a little tricky though. CRA considers loyalty points to be a “gift” that can be donated to a registered charity but since points have no cash value, what would you get on your donation receipt?
To leverage this strategy, your beneficiary would have to redeem the points for items and then transfer the items to a registered charity for an in-kind donation. It’s important to note that depending on what items you redeemed, the charity may or may not want the gift you offered. For example, gift cards may be more popular than plane tickets.
The donation tax receipt will be based on the fair market value of the redeemed item gifted.
Forfeited upon death
Reading the fine print on various loyalty programs is aways a good idea. For example, some programs will have a clause in the agreement that upon death of the account holder all points are forfeited and cannot be transferred to another account. However, it is rare for organizations to adopt the forfeiture-on-death approach.
Documentation
Organizations may ask for a copy of the death certificate, letter from executor, copy of the will indicating beneficiaries. Often, sending electronically a copy of these documents is sufficient, or showing the documents in person.
This is unlike financial institutions, which will often require the original or a notarized copy. My advice for executors is to draft a general email that has the deceased’s name, including the date of death, and has the relevant documents attached, that you can use as a general template.
Kevin Greenard CPA CA FMA CFP CIM is a Senior Wealth Advisor and Portfolio Manager, Wealth Management with The Greenard Group at Scotia Wealth Management in Victoria. His column appears every week at timescolonist.com. Call 250.389.2138, email [email protected], or visit greenardgroup.com.
