Multiple owner accounts
There are also accounts that have more than one adult owner, and even accounts involving children.
Tenants in common (TIC/JTIC)
Tenants in common (TIC), also called joint tenants in common (JTIC), is the base structure for joint accounts; unlike a JTWROS, a TIC has no automatic survivorship, since each tenant’s share passes to their own estate when they die rather than to the other tenants. Two or more persons open the account together and are named as tenants. Each tenant would have a proportional ownership of the entire account based on their proportional contribution. All tenants are recorded as owners on all securities “FBO Owner 1, Owner 2, Owner 3…”, and similarly, all checks are made payable to all tenants. During the time the account is open, all tenants are able to make trades in the account by their own authority. The firm may also send account statements to someone else, such as the tenants’ accountant, if the tenants ask in writing, but it must keep sending them directly to the account’s owners. FINRA’s account statement rule speaks only of “the customer” and doesn’t say whether one tenant or all of them must receive them.
If any tenant dies, the entire account is frozen until the proper legal documents are received. At that point, the proportional ownership of the deceased in the account will be left to the estate, and follow a will or any other legal instructions. The remaining tenants will then be able to transact business in the account again, with the deceased’s share passing to their estate’s beneficiaries rather than to the surviving tenants.
Joint tenants with right of survivorship (JTWROS)
Very similar to a TIC, except that when one of the tenants dies, the remaining tenants inherit the money. Unlike a TIC, there are no separate percentage shares: each tenant holds an equal, undivided interest in the whole account. Most often, these are done in marriages, but they do not have to be.
In some cases, people could use these instead of transfer on death (TOD). TOD designations simply mean that when the person dies, the account is transferred to the stated person(s), and the named beneficiaries have no ownership or access while the owner is alive. By contrast, if 2 parents add their 2 children directly as JTWROS owners, those children immediately become co-owners of the account and can transact on it while the parents are alive. In an account with a TOD designation, the children would not get access until the last parent passes. JTWROS accounts often have TOD on them, but the children are not owners of the JTWROS account; they’re only named as TOD beneficiaries.
Joint tenants by the entirety (TBE)
Tenants By the Entirety (TBE) aka Joint Tenants By the Entirety, is similar to the previous two, except it is not available in every state. This time, though, it must be in a marriage between 2 people. This is only 2 people. The primary difference as well is that the 2 people must be in agreement on transactions; they cannot be conducted on only 1 tenants orders, as the previous 2 could.
Community property
Community property is an account held by 2 people who must be married. Like TBE, not every state has these. In community property states, anything considered community property is equally owned by both parties, regardless of who acquired the property, assets, or income. It would also include individually owned property that became ‘commingled’ with joint property. Who may act on a community property account is set by the law of the couple’s state.
Accounts with minors
Uniform Gift to Minors Act account (UGMA accounts) and Uniform Transfers to Minors Act accounts (UTMA accounts)
UGMAs and UTMAs are extremely similar in their function, and differ in 2 main ways: what they can hold, and the age of control. A UGMA is generally limited to cash and securities, while a UTMA can hold almost any kind of property, including real estate. These are both types of accounts where money is being gifted, given to a minor. It becomes the minor’s property; the minor owns it. Minors can’t legally enter into contracts, so they need a custodian to control and manage the money for them until they reach the age of control. That most often is age of majority, in most states 18. With a UGMA, the age of control is the age of majority in the state of issuance. With a UTMA, the age of control can be set by the person creating the UTMA account up to the max age set by the state, which could be as high as age 25. Until the age of control, the minor cannot directly access the account.
The custodian is assigned by the person funding the account, and does not have to be the parent. The parents do not have to be involved, but to open the account, the social security number of the child must be known, so likely a guardian would be involved if not the parents directly.
UGMAs and UTMAs, as stated, are the property of the minor, which can bring up 2 unforeseen complications. When applying for financial aid for college, a smaller focus is on the parents’ assets and income, and a much larger focus is on the child’s assets and income. The UGMA/UTMA is the child’s assets, so if college funding is done with UGMAs and UTMAs, it could prevent financial aid, until all of the UGMA/UTMA has been used. The other complication arises if the minor dies before reaching the age of control: as with most accounts, the money goes to the owner’s estate, and the owner is the minor.
The custodian is allowed to withdraw money for the benefit of the child; pay for education, pay for medical expenses, and similar expenses. They can also withdraw money to pay the taxes that may be due. The account is directly registered to the social security number of the minor, meaning the minor is the one who owes the taxes. Minors can’t pay taxes, so the custodian pays the taxes, usually by simply pulling it out of the account. Custodians are even allowed to take payment for themselves for services, but that compensation must be monitored and appropriate to the actual work involved. Managing a $25,000 UGMA/UTMA does not require a lot of work, and likely wouldn’t justify compensation for the custodian. Managing a $50 million UGMA/UTMA account, on the other hand, could involve substantial work and justify greater compensation.
Guardians
Guardianship gives a legal guardian the authority to make a wide range of personal, medical, and other day-to-day decisions. In most situations, the biological parents raising the children are the guardians. Adopted parents would also similarly be the guardians until the child turns 18. Depending on needs, adults can also have guardians when dealing with severe mental development problems or dementia related illnesses.
Conservators
A conservator manages a person’s money and property, while a guardian handles personal and day-to-day care. Some states combine the two roles, especially for minors. Either can be given authority over a customer’s account, so the firm reads an official copy of the court appointment to see what it grants.