FINRA Series 6 Investment Company and Variable Contracts Products Representative ExaminationOpening and Maintaining Customer Accounts and Investment RecommendationsMedium
A client is opening a new brokerage account and wishes to designate a specific individual to receive the assets in the account upon their death, without the need for probate. The client wants to maintain full ownership and control of the assets during their lifetime. Which type of registration would BEST achieve this objective?
- AIndividual Account with a Will
- BTenants in Common (TIC)
- CJoint Tenants with Rights of Survivorship (JTWROS)
- DTransfer on Death (TOD)
Show answer & explanationAnswer & explanation
Correct answer: D. Transfer on Death (TOD)
A Transfer on Death (TOD) designation allows the client to name beneficiaries who will receive the assets directly upon their death, bypassing probate, while the client retains full ownership and control of the assets during their lifetime. This perfectly matches the client's requirements.
Why the other options are wrong
- A. An individual account with a will means the assets would go through probate according to the will, which the client wishes to avoid.
- B. TIC involves co-ownership where each owner's share goes to their estate upon death, requiring probate, which the client wants to avoid.
- C. JTWROS involves co-ownership where the surviving owner automatically receives the assets, but it means shared control during life, not sole control as the client desires.
Transfer on Death (TOD) Registration
A brokerage account designation that allows specific beneficiaries to inherit assets directly upon the owner's death, bypassing probate, while the owner retains full control during their lifetime.
- Bypasses probate for designated assets.
- Owner retains full control during life.
- Beneficiaries receive assets directly upon death.
Memory trick: TOD: Take Ownership Directly