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Difficulty: Very hardCustomer Account Types and Ownership Structures

An investor maintains three separate brokerage accounts at a FINRA member firm: a Joint Tenancy with Rights of Survivorship (JTWROS) account with a spouse, a Tenants in Common (TIC) account with a business associate where the investor owned a 60% interest, and an individual account for which the investor had previously granted Limited Power of Attorney (LPOA) to an independent financial advisor. Following the investor's unexpected death, the firm receives official notice along with a certified death certificate. Which of the following describes the correct regulatory handling of these accounts?

  1. The financial advisor's trading authority over the individual account is immediately revoked, the deceased investor's 60% interest in the TIC account passes to the investor's estate, and the surviving spouse assumes sole ownership of the JTWROS account upon fulfilling firm documentation requirements.Answer
  2. B
    The surviving business associate automatically assumes full ownership of the entire TIC account outside of probate, while the financial advisor retains limited trading authority over the individual account to settle pending transactions.
  3. C
    The financial advisor may continue managing the individual account under the LPOA until the estate is settled, while assets in both joint accounts are frozen and must pass through the deceased investor's probate process.
  4. D
    The surviving spouse and business associate each inherit equal 50% stakes in their respective joint accounts, while the individual account must be immediately liquidated by the financial advisor.

Answer

The financial advisor's trading authority over the individual account is immediately revoked, the deceased investor's 60% interest in the TIC account passes to the investor's estate, and the surviving spouse assumes sole ownership of the JTWROS account upon fulfilling firm documentation requirements.
Upon the death of a customer, any power of attorney (limited or full) over an individual account is immediately terminated by operation of law. In a Tenants in Common (TIC) account, the deceased's designated percentage (60%) passes to their estate rather than to the surviving tenant. In a Joint Tenancy with Rights of Survivorship (JTWROS) account, the surviving joint tenant automatically inherits full ownership of the account assets outside of probate upon presenting required legal documentation.

Step-by-Step Solution

1
Evaluate the status of the Limited Power of Attorney (LPOA) upon the account holder's death.
The LPOA is automatically and immediately revoked upon the grantor's death, terminating all third-party trading authority.
Powers of attorney only remain valid while the grantor is living.
2
Determine the disposition of assets in the Tenants in Common (TIC) account.
The deceased investor's 60% fractional share does not transfer to the surviving partner; instead, it becomes part of the deceased's estate.
TIC accounts do not carry survivorship rights; tenant shares pass according to the decedent's will or probate.
3
Determine the disposition of assets in the Joint Tenancy with Rights of Survivorship (JTWROS) account.
The surviving spouse becomes the sole owner of 100% of the account assets upon presenting proper documentation (death certificate).
JTWROS titling includes right of survivorship, allowing assets to pass directly to surviving owners outside of probate.

Key Concept

Rights of Survivorship (JTWROS vs. TIC) and Power of Attorney Revocation upon Death
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Topics

Customer Account Types and Ownership Structures