FINRA Series 7Opens Accounts and Evaluates Customer ProfileEasy
A married couple opens a new brokerage account and instructs their registered representative to register the account as 'Tenants in Common.' If one spouse dies, what happens to that spouse's share of the account?
- AIt is split evenly between the surviving spouse and the broker-dealer
- BIt becomes part of the deceased spouse's estate and passes according to the will or intestacy laws
- CThe account is frozen permanently and cannot be distributed
- DIt automatically passes to the surviving spouse outside of probate
Show answer & explanationAnswer & explanation
Correct answer: B. It becomes part of the deceased spouse's estate and passes according to the will or intestacy laws
Unlike JTWROS, a Tenants in Common (TIC) account has no right of survivorship. Each tenant's interest is a distinct, specified percentage that becomes part of that individual's estate upon death, subject to probate and the terms of the deceased's will.
Why the other options are wrong
- A. Broker-dealers have no ownership claim on customer assets.
- C. Accounts are not frozen indefinitely; the estate's share is administered through probate.
- D. That describes JTWROS, not tenants in common.
Tenants in Common (TIC)
A joint account form where each owner holds a specified, often unequal, percentage of the account with no right of survivorship.
- Deceased owner's share passes to their estate, not the co-owner
- Percentages of ownership can be unequal
- Contrasts with JTWROS, which passes automatically to survivors
Memory trick: 'Common' shares go to the estate, not to the co-owner.