Types of Joint Brokerage Accounts With Spouses
There are many types of brokerage accounts. But for a husband and wife, there are two basic types of joint brokerage accounts. Both types require that the account-holders be 18 or older. It is recommended that legal advice be sought to determine the type of structure that's best for you.
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Attributes
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In a "joint tenants with right of survivorship," or JTWROS, brokerage account, a surviving spouse automatically inherits the total value of a deceased spouse's share of the account assets.
In a "joint tenants in common," or JTIC, brokerage account, the surviving spouse does not necessarily inherit the account assets of the deceased spouse. Each spouse has the right to specify in a written will how that spouse's share of the assets will be dispersed upon death. Generally the assets are held in a 50-50 ratio, but that is not required.
Options
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The JTIC structure sets up ownership in a way that allows each spouse to choose how to deal with that spouse's portion of the account assets. While alive, each spouse may decide how to sell or deal with that share of the asset. For example, the spouse may sell the interest.
The JTWROS structure does not allow each spouse to independently control that portion of the asset. The asset is shared equally and indivisibly.
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Advantages and Disadvantages
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In a JTWROS, both owners have equal and lawful right to the account assets. Because the deceased spouse's interest in the asset automatically passes to the remaining spouse, probate is avoided. The deceased spouse's portion of the asset cannot be inherited by heirs. It simply dissolves into the right and ownership of the surviving spouse.
In the JTIC, spouses are considered to be more like shareholders, each owning a separate and defined portion of the asset. A spouse has the right and opportunity to leave his or her portion of the asset to heirs. The asset may also be left to the surviving spouse in total. This is the choice of each spouse and needs to be clearly addressed in the written will.
Termination of Structure
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If the spouse who is party to a JTIC structure decides to terminate the joint interest that pertains to that spouse, the parties can come to an agreement as to how the asset should be divided. Each spouse is then left with a portion of the asset representing that spouse's share.
It is also possible to terminate a JTWROS structure, although it is not as simple as with a JTIC. A petition must be filed with the courts. If the court grants this request, the asset is either broken into shares of equal value, or it is sold and the proceeds are distributed between the co-owners.
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References
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