Quick Answer
JTWROS and TBE pass automatically to survivors and skip probate; TIC passes through probate to the deceased's estate. TBE is limited to married couples and, where recognized, generally protects against a creditor of only one spouse. Community property with rights of survivorship (CPWROS) uniquely gives both spouses a stepped-up basis at the first spouse's death, not just the deceased's half.
How an account is titled determines who controls the assets, who can make transactions, and what happens when an owner dies. The exam tests individual ownership and four primary forms of joint ownership.
What Is Individual Ownership?
- A single named owner holds sole title to the account
- The owner has full, exclusive authority to direct all investment decisions and transactions
- No right of survivorship: a spouse or relative gains no automatic ownership interest or transaction authority merely by marriage or relation
- At the owner's death, assets pass through the owner's estate and are subject to probate under the will, or under state intestacy law if there is no will
- A transfer-on-death (TOD) beneficiary designation lets the owner avoid probate without converting to joint ownership; see Transfer on Death (TOD) and Pay on Death (POD)
Key Exam Point: Only the named owner, or a person with documented legal authority such as a power of attorney, can direct transactions on an individually owned account. A spouse cannot authorize trades or withdrawals based on marital status alone.
Exam Tip: Gotchas
- Individual ownership has no survivorship feature. Without a TOD beneficiary, the account passes through probate at the owner's death, even if the owner is married.
- Marriage alone does not create transaction authority. A firm should decline instructions from a spouse or relative unless its records show that person has recognized legal authority over the account.
How Do the Four Ownership Forms Compare?
| Feature | JTWROS | TIC | TBE | Community Property (CPWROS) |
|---|---|---|---|---|
| Who can use | Any two or more people | Any two or more people | Married couples only | Married couples (community property states) |
| Ownership shares | Equal | Can be unequal | Equal (50/50) | Equal (50/50) |
| Right of survivorship | Yes | No | Yes | Yes (with WROS election) |
| At death | Passes to surviving owner(s) | Passes to deceased's estate | Passes to surviving spouse | Passes to surviving spouse |
| Probate | Avoided | Required (deceased's share) | Avoided | Avoided (with WROS) |
| Creditor protection | Weak | None | Often strong for one-spouse debts where recognized; state law controls | Varies by state |
| Step-up in basis | Deceased's share only | Deceased's share only | Deceased's share only | Both halves (double) |
Memory Aid:
- JTWROS = "Right Of Survivorship" (survivor gets all)
- TIC = "In Common" (your share goes to your estate)
- TBE = "By the Entirety" (married couples only)
Key Exam Point: Suitability applies to every owner on a jointly owned account, not just the owner who opens the account or gives instructions. NASAA's model rule on unethical business practices for advisers and IARs bars recommending a security without reasonable grounds to believe it is suitable for the client, based on reasonable inquiry into the client's investment objectives, financial situation, and needs. On a joint account every owner is the client, so the inquiry and the recommendation have to account for all of them, whichever of the four forms (JTWROS, TIC, TBE, or CPWROS) the account uses. The rule states the suitability standard in general terms; it contains no separate joint-account provision.
What Is Joint Tenants with Right of Survivorship (JTWROS)?
- All owners have equal, undivided interest
- When one owner dies, their share passes automatically to the surviving owner(s)
- Bypasses probate; assets transfer by operation of law
- Any owner can typically trade in the account
- Not limited to married couples; any two or more persons can hold JTWROS
- Checks/distributions must be made payable to all owners
Key Exam Point: In JTWROS, each owner has an equal share regardless of who contributed the funds. If three people own an account as JTWROS and one dies, the two survivors each own 50%.
Exam Tip: Gotchas
- JTWROS passes to the survivors automatically, but TIC does not. A JTWROS share skips probate; a TIC share passes to the deceased owner's estate and requires probate.
- Any owner can typically trade in the account, but checks and distributions must be made payable to all owners. Equal ownership lets any owner place trades; it does not let one owner unilaterally take a distribution or liquidate proceeds for themselves.
What Is Tenants in Common (TIC)?
- Each owner holds a specific, divisible share (e.g., 60/40 split)
- Shares do not have to be equal
- No right of survivorship
- When an owner dies, their share passes to their estate (not to the other owners)
- Each owner can sell, gift, or bequeath their share independently
- Requires probate for the deceased owner's share
Think of it this way: TIC is the "independent" form of ownership. Each person owns their piece outright. When they die, their piece goes where their will says, not automatically to the other owner.
Exam Tip: Gotchas
- TIC does NOT have right of survivorship. A deceased owner's share goes to their estate, not to the other co-owners. The deceased owner's will or intestacy laws control disposition, not the account title.
What Is Tenancy by the Entirety (TBE)?
- Available only to married couples (recognized in roughly half of U.S. states)
- Both spouses have equal, undivided ownership
- Right of survivorship (like JTWROS, but only for spouses)
- Both spouses must consent before either can sell, transfer, or encumber the property
- Where recognized for the property, generally protects against a creditor of only one spouse; state-law exceptions apply
- Dissolved by divorce, mutual agreement, or death; in most states, divorce converts the title to tenants in common (TIC) between the former spouses
Key Exam Point: TBE differs from JTWROS because neither spouse can unilaterally transfer their interest, and where recognized, a creditor of only one spouse generally cannot reach the asset (subject to state-law exceptions).
Exam Tip: Gotchas
- TBE requires marriage. It is dissolved by divorce, mutual agreement, or death. In most states, divorce converts the title to tenants in common (TIC) between the former spouses, not to JTWROS.
- TBE gives more creditor protection than JTWROS. In JTWROS, an individual creditor can pursue one owner's share. In TBE, where recognized, a creditor of only one spouse generally cannot reach the asset, though state-law exceptions apply.
What Is Community Property with Right of Survivorship (CPWROS)?
- Available only in community property states: AZ, CA, ID, LA, NV, NM, TX, WA, WI (plus AK as opt-in)
- Property acquired during marriage is owned equally by both spouses
- With WROS election, surviving spouse receives full ownership at death
- Provides a unique tax advantage: both halves of community property receive a stepped-up basis at the first spouse's death
Think of it this way: Community property means "what's earned during the marriage belongs to both." CPWROS adds the survivorship feature so assets pass directly to the surviving spouse without probate.
Exam Tip: Gotchas
- Community property gets a step-up on both halves at the first spouse's death. JTWROS steps up only the deceased owner's half, which makes this a significant tax planning difference.
- CPWROS is available in 10 states: the 9 default community property states plus Alaska, which is opt-in. Do not confuse with TBE, which is available in more states.
What Should You Check on Exam Day?
- Match each ownership form to what happens at the death of one owner and whether probate applies.
- Remember that community property alone gives a double step-up in basis; JTWROS, TIC, and TBE step up only the deceased's share.
- Confirm TBE requires marriage, both spouses' consent to transfer, and, where recognized, generally protects against a creditor of only one spouse (state-law exceptions apply).
- Confirm CPWROS is limited to the 9 community property states plus opt-in Alaska.
- Remember TIC is the only one of the four joint forms that requires probate for the deceased owner's share.
- Remember an individually owned account has no survivorship feature and passes through probate unless a TOD beneficiary is named; only the named owner, or a person with documented legal authority, can direct transactions.
- Remember that on a jointly owned account, suitability must be gathered and evaluated for every owner, not just the primary or initiating owner, under NASAA's unethical business practices rule for advisers and IARs.