| Something to think about when opening a new account…read on:
CLIENT QUESTION:
I would like to open a brokerage account but I am not sure whether to open it up as an individual account or joint account (with either my mother or my sister). With respect to a joint account, is it better to elect tenancy with right of survivorship or tenancy in common? I am 27 years old, single, and employed.
Any help or guidance is greatly appreciated.
MY RESPONSE:
Good for you. I wish more young people would be thinking about investments.
This is your money….so I don’t see any reason why you would want to put someone else’s name on your account. For educational purposes, let me explain the two types of joint accounts but you don’t need either one.
Joint tenancy with right of survivorship means you both have title to the account but the survivor automatically inherits it all, without probate.
Tenancy is common means you each own an undivided half interest and the survivor does not automatically inherit your half. Your half would pass by your Last Will and Testament. You are giving the joint owner absolute ownership of half now. But why would you ever do this?
In either case, you are losing some control of your assets, which is generally unacceptable.
The better way to title the account is to have it solely in your individual name but name whoever you want as a beneficiary. The beneficiary would then inherit the account upon your death (without probate) but have zero control over your money during your life.
Note I may have different advice for an older person who relies more on a child, but not for a 27-year-old just starting out.
Keep saving! |
