Joint Tenants With Right Of Survivorship

Ambrosine asks to open a mutual fund account registered jointly between herself and her 13-year-old daughter Clemence, with right of survivorship. Her representative should tell her that:

1. A.a minor cannot be a joint owner, and a custodial account under the Uniform Transfers to Minors Act is the appropriate structure.Correct. Minors lack contractual capacity; UTMA is the standard alternative.
2. B.the account may be opened as tenants in common but not with right of survivorship.Changing the survivorship feature does not solve the capacity problem.
3. C.the account may be opened but Clemence may not give orders until she reaches the age of majority.The problem is ownership, not order-entry privileges.
4. D.the account may be opened so long as Ambrosine, as parent, signs on Clemence behalf.A signature by a parent does not confer capacity the minor does not have.

Why: A minor cannot enter into a binding contract, and a joint account depends on each owner having full legal capacity to give orders and to be bound by the account agreement. The account as requested cannot be opened. The appropriate structure is a custodial account under the state Uniform Transfers to Minors Act, in which Ambrosine acts as custodian, the assets belong to Clemence, and control passes to her at the age set by state law.

Which account registration passes the decedent's interest to the survivor outside of probate?

1. A.Tenants in commonTenants in common is also a joint registration, which is the source of the confusion. It carries no survivorship feature: the deceased owner's share goes to their estate and passes through probate under the will.
2. B.Joint tenants with right of survivorshipCorrect - JTWROS avoids probate for that interest.
3. C.UTMA custodial accountA UTMA has one owner, the minor, and a custodian who merely manages the property. There is no co-owner to survive to, so the survivorship concept does not apply.
4. D.Individual accountAn individual account has a single owner and no survivor, so at death it flows into the estate and through probate. Adding a transfer-on-death designation would change that, but a plain individual registration does not.

Why: Joint tenants with right of survivorship (JTWROS) passes the decedent's share directly to the surviving owner.

Two sisters open a brokerage account together as JOINT TENANTS WITH RIGHT OF SURVIVORSHIP. One sister dies. Regarding her interest in the account:

1. A.The account is frozen permanently until a probate court issues distribution instructionsBecause the transfer happens by operation of the survivorship feature, no probate order is needed to move the interest.
2. B.It passes to her estate and is distributed under the terms of her willThat is how tenants in common works. A survivorship account transfers directly to the surviving owner.
3. C.It is divided equally between the surviving sister and the deceased sister's heirsNo division occurs. The entire interest passes to the surviving joint tenant.
4. D.It passes automatically to the surviving sister, outside her probate estateCorrect. Automatic transfer to the survivor is exactly what the right of survivorship provides, which is why the interest bypasses probate.

Why: In a joint tenancy with right of survivorship, the deceased tenant's interest passes automatically to the surviving tenant or tenants, outside the probate estate. That automatic transfer is the defining feature of the account type and the reason people choose it. It contrasts with tenants in common, where a deceased tenant's share passes to her estate and is distributed under her will or the intestacy laws. The clue is the account title itself, which states the survivorship feature. Review the topic on account registration types.

Roswell and Marianne Chetwode maintain a joint brokerage account with rights of survivorship. Roswell telephones the agent, sells 400 shares without consulting Marianne, and asks that the proceeds be paid out by cheque made payable to him alone. Under customary account rules, the agent should:

1. A.refuse the sale as well as the cheque, because orders in a joint account require the assent of both ownersEither owner may enter orders in a joint account.
2. B.execute the sale but issue the cheque payable to both Roswell and MarianneCorrect. Either owner may trade, but distributions must be made in the names of all owners.
3. C.execute the sale and issue the cheque to Roswell alone, since either owner may direct the accountTrading authority does not extend to taking assets out of the joint account in one owner's name.
4. D.execute the sale and hold the proceeds in the account indefinitely, since no distribution from a joint account is permittedDistributions are permitted; they simply go to all owners.

Why: In a joint account either owner may ordinarily enter orders for the account, so the sale itself is unremarkable and requires no consultation with the other owner. Distributions are treated differently: cash or securities taken out of a joint account must be paid or delivered in the names of ALL the owners, because a withdrawal shifts assets out of joint ownership into the hands of one person. The agent should therefore execute the trade and issue the cheque in both names.