Could a joint account holder undo a New Mexico tax levy when she supplied all the money but had given her deceased brother withdrawal rights?

Plain-English summary

New Mexico lawfully levied bank accounts bearing Richard Lopez's name even though his sister Elaine had opened the accounts and made every deposit. Richard had been given withdrawal rights, and the bank had not been told of his death or removed his name when it received the warrant.

Richard died on September 7, 2013. A few years before his death, Elaine added him to her accounts and authorized him to withdraw money as a way to help Richard and their father.

Elaine was the only person who ever deposited funds. She believed Richard's authority ended at death, but she misplaced the death certificates and did not promptly notify the bank. The Department did not learn that Richard had died until Elaine contacted it after discovering the March 2014 levy.

The levy reached rights to property, not only contributed funds

Elaine conceded that the warrant was properly prepared and served. Her dispute concerned ownership: she argued that the money was solely hers.

Section 7-1-31(A) allowed collection from a delinquent taxpayer by levy on all property or rights to property. Section 7-1-34 and Regulation 3.1.10.9 required the bank to surrender funds to which the taxpayer had a right when a valid warrant was served.

Because Richard remained named on the accounts with withdrawal authority, the AHO held that the levy reached the funds regardless of who had deposited or actually owned them.

A refund claim remained available

The decision did not determine whether Elaine could recover her money through a different procedure. It expressly stated that nothing in the order prevented her from filing a refund claim under Section 7-1-26.

Result: protest DENIED. The warrant of levy was upheld.

What this means for you

Joint account holders

For levy purposes, a person's legal right to withdraw funds can matter even when another holder supplied every dollar. Keep account ownership and withdrawal authority current.

Families handling a death

Promptly notify financial institutions and update joint accounts. Here, the deceased taxpayer's name and access remained in the bank's records when the warrant arrived.

Third parties claiming levied funds

Losing the levy protest does not necessarily decide a separate refund claim. This order specifically preserved Elaine Lopez's ability to pursue the statutory refund process.

Common questions

Q: Did Elaine Lopez contribute all the money?
A: Yes. The decision found that she opened the accounts and was the only depositor.

Q: Why could the Department levy the accounts?
A: Richard's name remained on them, and Elaine had granted him withdrawal rights that were still reflected at the bank when the warrant was served.

Q: Was the warrant itself defective?
A: No. Elaine conceded that it was properly prepared and served.

Q: Could Elaine still seek return of the funds?
A: Yes. The decision preserved her right to file a refund claim under Section 7-1-26.

Citations and references

Statutes and regulation:

• NMSA 1978, §§ 7-1-31(A), 7-1-32, and 7-1-34 — levy authority, warrant requirements, and surrender of property
• NMSA 1978, § 7-1-26 — refund claim
• Regulation 3.1.10.9 NMAC — financial institution's duty when served with a levy

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Richard Lopez
• Decision PDF: D&O 14-34

Original ruling text

BEFORE THE HEARING OFFICER
OF THE TAXATION AND REVENUE DEPARTMENT
OF THE STATE OF NEW MEXICO

IN THE MATTER OF THE PROTEST OF
RICHARD LOPEZ, No. 14-34
TO THE WARRANT OF LEVY ISSUED UNDER
ID NO. L0784244176

DECISION AND ORDER

A formal hearing on the above-referenced protest was held August 22, 2014, before Dee

Dee Hoxie, Hearing Officer. The Taxation and Revenue Department (Department) was

represented by Ms. Elena Morgan, Staff Attorney. Ms. Sonya Varela, Auditor, also appeared on

behalf of the Department. Ms. Elaine Lopez appeared on behalf of the Taxpayer and represented

herself. The Hearing Officer took notice of all documents in the administrative file. Based on

the evidence and arguments presented, IT IS DECIDED AND ORDERED AS FOLLOWS:

FINDINGS OF FACT

1. On March 17, 2014, the Department served a warrant of levy to a bank that had accounts

with the Taxpayer’s name on them.

2. On April 23, 2014, Ms. Lopez filed a formal protest letter.

3. On June 6, 2014, the Department filed a Request for Hearing asking that the Taxpayer’s

protest be scheduled for a formal administrative hearing.

4. On June 6, 2014, the Hearings Bureau issued a notice of hearing. The hearing date was

set within ninety days of the protest.

5. On June 18, 2014, Ms. Lopez requested a continuance of the hearing in order to secure all

of the documentation that she needed.

6. On June 20, 2014, the request for continuance was granted, and the delay of the hearing

was attributable to the Taxpayer.

7. On June 20, 2014, the Hearings Bureau sent amended notices of hearing.

8. The Taxpayer died on September 7, 2013. Ms. Lopez is the Taxpayer’s sister and a joint

owner of the accounts that were levied.

9. Ms. Lopez misplaced the Taxpayer’s death certificates and did not promptly inform the

bank of his death for that reason.

10. The bank accounts were opened by Ms. Lopez, and she was the only person who ever

deposited into the accounts.

11. A few years prior to his death, Ms. Lopez placed the Taxpayer’s name on her accounts

and granted him authorization to withdraw funds from her accounts. Ms. Lopez was

making a gift of funds to help the Taxpayer and their father.

12. The Taxpayer was using Ms. Lopez’s address as a mailing address for some amount of

time before his death. Ms. Lopez has continued to receive mail for the Taxpayer and his

estate since his death.

13. Ms. Lopez discovered that her funds had been levied in March 2014. Ms. Lopez was

unaware of the outstanding tax liability that the Taxpayer had to the state of New Mexico.

14. The Department was unaware of the Taxpayer’s death until Ms. Lopez contacted them

about the levy.

DISCUSSION

The issue to be decided is whether the Taxpayer’s accounts were legally levied.

Warrants of levy.

Richard Lopez
Letter ID No. L0784244176
page 2 of 4
Warrants of levy must contain certain information to be valid. See NMSA 1978, § 7-1-32

(1993). Ms. Lopez conceded that the warrant of levy was properly prepared and served. Ms.

Lopez disputes the Department’s right to the funds in the account as they were her sole property

and did not belong to the Taxpayer.

The Department may collect tax from a delinquent taxpayer “by levy upon all property or

rights to property of such person”. NMSA 1978, § 7-1-31 (A) (1993) (emphasis added). Ms.

Lopez admitted that she granted the Taxpayer the right to withdraw her money from the accounts

levied. Ms. Lopez thought that right terminated upon the Taxpayer’s death, but admitted that she

did not advise the bank of his death or take his name off the account after his death. The bank

was required to surrender all funds to which the Taxpayer had a right when it was served with a

proper warrant of levy. See NMSA 1978, § 7-1-34 (1993). See also 3.1.10.9 NMAC (2001).

Unfortunately for Ms. Lopez, the warrant of levy legally seized all of the funds to which the

Taxpayer had even a basic right, regardless of the actual ownership of the funds.

Nothing in this decision shall be construed to prevent or prohibit Ms. Lopez from filing a

claim for refund pursuant to NMSA 1978, § 7-1-26.

CONCLUSIONS OF LAW

1. Ms. Lopez filed a timely written protest on behalf of the Taxpayer to the warrant of

levy issued under Letter ID number L0784244176, and jurisdiction lies over the parties and the

subject matter of this protest.

2. Ms. Lopez granted the Taxpayer a right to the funds in her bank accounts, and the

Taxpayer’s name was added to the accounts.

3. The Department legally served a warrant of levy on those accounts.

Richard Lopez
Letter ID No. L0784244176
page 3 of 4
For the foregoing reasons, the Taxpayer's protest is DENIED.

DATED: October 8, 2014.

Dee Dee Hoxie
DEE DEE HOXIE
Hearing Officer
Taxation & Revenue Department
Post Office Box 630
Santa Fe, NM 87504-0630

Richard Lopez
Letter ID No. L0784244176
page 4 of 4