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Question

Difficulty: MediumCustomer Account Types and Ownership Structures

Two business partners open a joint brokerage account and explicitly specify that if one partner dies, that partner's fractional interest in the account must be distributed to their estate rather than automatically transferring to the surviving partner. Which account ownership structure must be established to satisfy this requirement?

  1. Tenants in Common (TIC)Answer
  2. B
    Joint Tenants with Rights of Survivorship (JTWROS)
  3. C
    Individual Account with Transfer on Death (TOD)
  4. D
    Joint Account with Full Power of Attorney

Answer

Tenants in Common (TIC)
In a Tenants in Common (TIC) account, each tenant owns a specified percentage of the assets. When a tenant dies, their portion of the assets passes to their estate or designated beneficiaries according to their will, rather than transferring to the surviving tenant.

Step-by-Step Solution

1
Identify the requested asset disposition upon the death of a joint account owner.
The partners require that a deceased owner's share passes to their estate, not to the surviving partner.
Understanding the legal distinction between survivorship rights and estate transfer rules is required to select the correct joint account structure.
2
Compare joint account ownership types regarding survivorship provisions.
Tenants in Common (TIC) directs the deceased owner's interest to their estate, whereas Joint Tenants with Rights of Survivorship (JTWROS) transfers the interest to the surviving tenant.
Matching account ownership rules with customer instructions determines the appropriate account designation.

Key Concept

Distinguishing survivorship rights between Tenants in Common (TIC) and Joint Tenants with Rights of Survivorship (JTWROS) accounts.
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Topics

Customer Account Types and Ownership Structures