7.1 Types of Clients
Account titling dictates ownership authority, tax liabilities, and disposition of assets upon death. Advisers must understand the legal consequences of each registration form.
Key NASAA Exam Takeaways
- Joint Tenants with Rights of Survivorship (JTWROS): At death of one tenant, ownership automatically transfers to the surviving tenant without probate.
- Tenants in Common (TIC): Deceased tenant's proportional interest passes to their designated heirs or estate, not the survivor.
- Transfer on Death (TOD) / Payable on Death (POD) bypasses probate court while keeping sole owner in full control during life.
- Trusts: Revocable trust assets remain in grantor's gross estate; Irrevocable trust assets are removed from the grantor's taxable estate.
| Feature | JTWROS | Tenants in Common (TIC) | TOD / POD Account |
|---|---|---|---|
| Ownership Split | Equal (undivided 50/50) | Can be unequal (e.g. 70/30) | 100% single owner |
| Disposition upon Death | Passes to surviving owner | Passes to decedent's estate / heirs | Passes to named beneficiary |
| Probate Court | Avoids probate | Subject to probate for decedent share | Avoids probate |
| Trading Authority | Either party can trade | Either party can trade | Owner only during lifetime |
Knowledge Checkpoint • Section 7.1
Two business partners open a brokerage account contributing $60,000 and $40,000 respectively. If one partner dies, they want the deceased partner's share to transfer to their own children rather than the surviving partner. How should the account be titled?