Quick Answer
Individual accounts have one owner, who may grant trading authorization to someone else. Joint accounts have multiple owners. The key exam distinction is JTWROS versus Tenants in Common: what happens to an owner's share when that owner dies, and whether the account passes through probate before transferring to survivors.
Moving from account types to account registrations, we start with the most common forms of ownership: individual and joint accounts.
Individual Accounts
- One owner with full control and authority over the account
- Only the account holder can make transactions (unless a trading authorization is granted to someone else)
- The simplest form of account registration
Exam Tip: Gotchas
A trading authorization lets someone other than the owner place trades, but it does not make them an owner. Distributions still belong to the account holder.
Joint Accounts
Joint accounts have two or more owners. All owners must sign the new account form. The key distinction is what happens when one owner dies.
| Type | Full Name | At Death of One Owner |
|---|---|---|
| JTWROS | Joint Tenants with Rights of Survivorship | Surviving owner(s) inherit the deceased's share automatically (bypasses probate) |
| TIC | Tenants in Common | Deceased's share passes to their estate (goes through probate, NOT to the surviving owner) |
Exam Tip: Gotchas
JTWROS bypasses probate; TIC does not. Expect a scenario describing an owner's death where the question hinges entirely on whether the account is JTWROS or TIC.
Key Rules for Joint Accounts
- Any one owner can typically place trades in the account
- Checks and distributions must be made payable to all owners of the account
- Each owner in a JTWROS has an undivided interest in the entire account (not a specific percentage)
- In a TIC account, each owner can specify their percentage of ownership (e.g., 60/40 split)
Exam Tip: Gotchas
In a JTWROS account, each owner has an undivided interest in the whole, not a fixed percentage. Only TIC accounts allow owners to carry specific percentage interests.
JTWROS vs. TIC: When Each Is Used
- JTWROS is most common between spouses; assets pass directly to the survivor
- TIC is common among business partners or unrelated investors who want their share to go to their own heirs, not to the co-owner
Exam Tip: Gotchas
- JTWROS = survives to the other owner (bypasses probate). TIC = goes to the deceased's estate (through probate). Remember: JTWROS has "survivorship" right in the name.
- Any one owner can trade, but checks and distributions must be payable to all owners.
What Should You Check on Exam Day?
- Can you explain what a trading authorization allows, and who still owns the distributions?
- Do you know the key difference between JTWROS and Tenants in Common at the death of one owner?
- Can you state which type of joint account bypasses probate?
- Do you know whether a JTWROS owner holds a fixed percentage or an undivided interest in the account?
- Can you explain who checks and distributions must be made payable to in a joint account?