Can a Joint Account Be Opened for Online Trading?
You can open online brokerage trading accounts as well as other investment accounts as joint accounts. Joint brokerage accounts fall into two categories: joint tenants with rights of survivorship and joint tenants in common. The accounts are barely distinguishable while both account owners are alive, but if an account owner dies, the two account types are handled very differently.
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Full Service vs. Online Trading
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Brokerage firms that employ investment advisers who have face-to-face meetings with clients offer full brokerage services. Online brokerage firms are normally classified as "discount brokers" because investors must make their own investment decisions and place their own buy and sell orders. Both full-service and discount brokers charge trade fees, but online trades often cost less than $10, whereas fees at full-service brokerages often amount to between $25 and $75 per trade. Generally, online brokerage firms do not charge the account inactivity fees that are common at full-service brokerage firms.
Joint Tenants
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If you open a joint tenants with rights of survivorship account, all securities held in the brokerage are jointly held, and if one owner dies, the other owner takes sole control of all the securities regardless of who bought the investments and who funded the account. If you open a joint tenants in common account, both owners have joint control of the account, but if one owner dies, that owner's share of the securities passes to his estate rather than the other account owner. If you are the sole beneficiary of the estate, then it makes no difference, but if you are not, the division of assets held in these accounts often becomes a complicated legal process.
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Insurance Coverage
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Some online brokerage firms enable account holders to buy certificates of deposit sold by banks as investments on the secondary market. These CDs are insured by the Federal Deposit Insurance Corporation up to $250,000 per issuing bank, per account owner. Therefore, if you jointly own a CD in an online brokerage, you enjoy $500,000 of coverage. Additionally, the Securities and Investor Protection Corporation insures most online trading accounts against brokers filing bankruptcy up to $500,000 per account owner. Therefore, joint accounts enjoy up to $1 million of SIPC coverage.
Other Considerations
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Having two owners on an online trading account means that you can more easily buy and sell securities,as either owner can transact on the account at any time. However, different people have different investment strategies and different levels of risk tolerance. Since both owners have equal rights to trade, you may end up spending a lot in trade fees if one owner keeps buying aggressive instruments and the other sells those securities and buys more conservative investments or vice versa. Online trading enables easy access, but requires good communication between joint owners.
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