9.1 Types of Accounts
Proper account classification determines legal ownership, tax liability, trading authority, and distribution of assets upon death.
Key FINRA Exam Takeaways
- JTWROS (Joint Tenants with Right of Survivorship): Deceased party's interest passes directly to surviving tenant; avoids probate.
- TIC (Tenants in Common): Deceased party's interest passes to their estate/heirs according to will; retains fractional ownership.
- Custodial Accounts (UGMA / UTMA): 1 minor and 1 custodian per account; irrevocable gifts; cannot be opened on margin.
- Corporate Accounts: Require corporate resolution naming authorized traders, plus corporate charter/bylaws for margin accounts.
- Partnership Accounts: Require partnership agreement stating which partners can execute transactions.
| Feature | JTWROS (Right of Survivorship) | TIC (Tenants in Common) |
|---|---|---|
| Ownership Split | Undivided equal ownership (100% shared) | Can be divided into unequal fractions (e.g. 60/40) |
| Upon Death of Owner | Passes directly to surviving co-owner(s) | Passes to deceased owner's estate / heirs |
| Probate Avoidance | Avoids probate court | Subject to probate court |
| Checks & Distributions | Drawn in names of ALL joint owners | Drawn in names of ALL joint owners |
Knowledge Checkpoint • Section 9.1
Two business partners open a joint brokerage account where Partner A contributes 70% of the capital and Partner B contributes 30%. Upon Partner A's death, Partner A's interest must pass to their spouse. Which account structure must be established?