In 1992, Maryland expanded the Financial Institutions section of the Maryland Code. See Md. Code Ann., Fin. Inst. § 1-204 (2012).This addition was intended to reverse the common law treatment governing “Totten” trusts and other accounts held by financial institutions. The Floor Report for the bill, H.D. 1119 (Md. 1992), summarizes the new legislation:
“This bill makes a number of changes to the multiple-party account law.
1. Clarifies that the accounts affected by the law are checking, savings, and share draft accounts as well as time deposits (including CDs). This clarifies that the law applies to CDS.
2. Clarifies that a multi-party accounts (MPTs) may not be established in the name of corporations and charitable or civic organizations. The bill repeals language that the account established on behalf of the charitable or civic organization must be established by an agent or trustee of that organization.
3. States that MPTs do not include accounts set up on behalf of a minor under the Maryland Uniform Transfers to Minors Act and the provisions dealing with the recovery by minors in tort actions.
4. Provides that the designation of a person as a “convenience person” is a durable power of attorney and that the designation is not affected by the disability of the parties to the account.
5. Currently, an MPT will be subject to the MPT law if the account is used after a notice is given that the law changed on October 1, 1993 and that the law will affect the rights of the parties. The bill clarifies that “use” of the account means any activity in the account or any information on file with the depositary institution.
6. Provides that, instead of being required to comply with the current requirement that the account parties be given a copy of the account agreement, the bill allows the depositary institution to instead provide a notice identifying the type of account, the survivorship rights of the parties, and how the parties can obtain a copy of the agreement.
7. Provides that written materials may be deemed given to the parties if delivered in person or mailed to the parties. Also provides that the written materials may be sent as part of the statement.
8. Allows for a “convenience person” to be designated on an account that is not a MPT.
9. States that a garnishment against property held by a financial institution in P.O.D. accounts or trust accounts that are MPTs is not valid unless all the parties are judgment debtors.”
Section 1-204 was meant to eliminate disputes as to whether various arrangements were convenience accounts or whether those arrangements were to be governed by title. Essentially, § 1-204 establishes a presumption that these accounts will be governed by title. It requires that financial institutions comply with the statute for every multiple party account established on or after October 1, 1993. This statute authorizes: (i) a “POD” account (pay-on-death account); (ii) a joint account (meaning, as understood at common law, survivorship); (iii) a trust account (created by the account agreement and where none of the beneficiaries are trustee); (iv) or a power of attorney account where there is a designation of a person as a convenience person on the account.
The purpose of the statute is to remove ambiguity as to the nature of the accounts. Therefore, “unless the account agreement expressly provides otherwise, upon the death of the last party to a multiple account, any funds remaining in the account shall belong” to the person entitled to those funds under the account agreement. § 1-204. If the account agreement does not expressly establish the right to funds to a certain person at the death of the party, or if there is no account agreement, any funds in the account upon the death of a party shall belong to the surviving party or parties. The presumptive correctness of the account agreements is not a per se bar to continued litigation. Issues remain concerning whether the account was established ab initio as a product of fraud, undue influence, or for any other reason that would cause the account to be set aside by a court. This legislation is specifically purposed to end litigation as to how the decedent meant the account to operate.
In Stanley v. Stanley, 175 Md. App. 246, 927 A.2d 246 (2007), the Court held that at the death of the creator of the multi-party account, the funds go equally to the joint owners. In that case, three of four surviving parties to the account closed the account, effectively shutting out the fourth owner. The Court of Appeals held that at the death of the creator of the account, the survivorship aspect of the account trumps the ability of the others to withdraw.
Accounts established before October 1, 1993 may also be subject to the terms of § 1-204 if: 1) the depository institution gave written notice of the law changes and how the parties’ rights may be affected; and 2) if after notice there was activity in the account, a written communication to the depositor about the changes, or some similar sign approving that the account be governed by § 1-204.