Franke Beckett LLC
Seldom do criminal cases help us understand the laws governing estates and trusts. Yet Wagner v. State, 445 Md. 404 (12/17/15) is one of those rare cases.
In Wagner, a father added his daughter as a “joint owner” of a multi-party account. The daughter also enjoyed a right of survivorship in the account. After being added to the account, the daughter began drawing out funds for her own purposes. When the father discovered what she was doing, he filed a criminal complaint for theft and embezzlement. He claimed that he placed his daughter on the account as a matter of convenience and that she should not have been using the funds for her own enjoyment. The daughter was tried and convicted. The daughter appealed the conviction with a simple proposition: how could she, as a joint accountholder, be guilty of theft when she was legally permitted to withdraw funds from the account without her father’s permission?
The Court of Special Appeals and the Court of Appeals disagreed and upheld the conviction. Thus, Wagner holds that a co-accountholder, who has been added to a multi-party account, can be convicted of theft and/or embezzlement if that co-accountholder was added to the account by the original accountholder for the purpose of creating a convenience account.
The holding of Wagner is interesting because it seems to go against the purpose of Fin. Inst. § 1-204 (multi-account provisions), which was enacted by the legislature to bring clarity to the rights of joint accountholders. When Fin. Inst. § 1-204 was enacted, the courts were full of litigation over joint accounts because ownership upon the death of a joint owner was determined by looking at the facts and circumstances surrounding the creation of the account. With the enactment of Fin. Inst. §1-204, the legislature made a bright line rule that title controls.
In Wagner, however, the Court of Appeals seems to wade back into the quagmire of looking at the intent of the parties to determine ownership. But, the Court of Appeals was careful to make a clear distinction between Fin. Inst. § 1-204 and the holding of Wagner. After an extensive review of the legislative history, the Court of Appeals states that that Fin. Inst. § 1-204 was enacted to “extinguish confusion regarding ownership rights of the funds in a multi-party account following the death of one of the parties.” In other words, the purpose of Fin. Inst. § 1-204 was to add certainty as to the ownership interest at death. It does not control ownership interests among the parties when they are alive. Thus, the effect of Wagner is that while joint accountholders of a multiparty account each have access to the funds, access is not the equivalent of ownership. To determine ownership during the joint lifetime of the owners, a court looks to the intent of the parties. Mr. Wagner testified that he did not intend his daughter to have unlimited access to his account, but that she was placed on the account for his convenience. Thus, Mr. Wagner’s daughter did not obtain “ownership” of the funds even though she had a legal right to withdraw them from the account.
The holding in Wagner also is interesting because it parallels the income tax treatment of joint accounts under federal law. If an account holder adds a co-accountholder during his or her lifetime, the new co-accountholder does not receive a gift upon the creation of the joint account; the gift only becomes complete when the new co-accountholder withdraws money for his or her own purposes. The income tax code, in effect, supports the concept that even though a person may be listed as a joint accountholder, the person does not have “ownership” of the money, and hence there is no completed gift, until the co-accountholder pulls the money out for his or her own purpose. If the money is taken out of the joint account for the original owner, it is not a gift because the funds are going back to the original “owner” of the funds.
Wagner certainly adds a new wrinkle to civil litigation involving joint accounts and we will have to stay tuned to see if the legislature seeks to amend Fin. Inst. § 1-204 so that it also applies during the lifetimes of the accountholders rather than just at their deaths.
