What Is a Joint Tenant Brokerage Account?

A joint tenant brokerage account is an investment account owned by two or more individuals. These accounts allow co-owners to collectively manage various assets, including stocks, bonds, mutual funds, and exchange-traded funds. They primarily simplify financial management for individuals who share financial goals, such as married couples or family members.

Types of Joint Brokerage Accounts

Joint Tenancy with Right of Survivorship (JTROS) is a common structure, especially for married couples. Under JTROS, all account holders have equal ownership rights to the assets. A defining feature is the right of survivorship, meaning that upon the death of one account holder, their share automatically transfers to the surviving account holder or holders. This transfer occurs outside of the probate process, allowing for a more direct transition of assets.

Tenancy in Common (TIC) offers more flexibility regarding ownership percentages. Unlike JTROS, TIC accounts do not include a right of survivorship. If an account holder passes away, their share of the assets does not automatically go to the co-owner(s). Instead, the deceased’s portion becomes part of their estate, subject to their will or applicable state intestacy laws. This arrangement necessitates estate administration to distribute the deceased’s share.

In some jurisdictions, brokerage accounts may be considered community property for married couples. Under community property laws, spouses own an undivided one-half interest in assets acquired during their marriage. This means each spouse has an equal share, and assets are treated as jointly owned for division upon divorce or death.

Account Operation and Ownership Rights

Opening a joint brokerage account requires information from all prospective account holders. Brokerage firms request full names, addresses, dates of birth, and Social Security Numbers (SSNs) or Taxpayer Identification Numbers (TINs). Additional details like employment, income, net worth, and investment objectives are gathered for regulatory compliance and investment suitability. This information is used to complete application forms.

Once established, joint accounts can be funded through electronic transfers from linked bank accounts, checks, or wire transfers. Any named account holder can typically initiate trades or make investment decisions independently. However, actions like changing beneficiaries or closing the account may require joint authorization from all account holders, depending on the firm’s policies. Any account holder can initiate withdrawals.

Shared ownership means all co-owners have equal access to account information and the ability to transact. This implies shared liability for debts or losses, such as margin calls or trading losses. All account holders are responsible for the account’s activities and financial obligations.

The process for handling the death of an account holder varies based on the account type. For a Joint Tenancy with Right of Survivorship (JTROS) account, the surviving owner(s) must notify the brokerage firm of the death. This notification requires submitting a certified copy of the death certificate. The brokerage firm will then transfer the assets directly into the name of the surviving account holder(s), bypassing probate.

Conversely, for a Tenancy in Common (TIC) account, the deceased’s share does not automatically transfer to the surviving co-owner. Instead, the deceased’s portion of the assets becomes part of their estate. These assets will be distributed according to the deceased’s will or, if no will exists, state intestacy laws, involving the probate court. The surviving account holder will need to provide the brokerage firm with legal documentation to facilitate the transfer of the deceased’s share.

Tax Treatment of Joint Brokerage Accounts

Income generated within a joint brokerage account, such as dividends or interest, is attributed to all account holders. Capital gains from selling investments are also shared among the owners. For tax reporting, the brokerage firm issues relevant 1099 forms (e.g., 1099-B, 1099-DIV, 1099-INT). While these forms are often issued to the primary account holder, the income should be reported on the individual tax returns of all account holders, typically split equally unless documented otherwise.

The cost basis of assets in a joint account can be adjusted upon the death of an account holder. For assets held in a JTROS account, the surviving owner receives a “step-up in basis” on the deceased’s portion. This means the cost basis for the deceased’s share is adjusted to its market value on the date of death. This adjustment can reduce future capital gains tax liabilities, as the taxable gain is calculated from this higher stepped-up basis rather than the original purchase price.

Joint accounts have implications for both estate and gift taxes. Upon the death of an owner, the value of assets held in a joint account is included in their taxable estate, depending on the account type and relationship between owners. For spouses, an unlimited marital deduction often means assets passing to a surviving spouse are exempt from federal estate tax. However, for non-spousal joint owners, a portion or all of the account’s value may be subject to estate tax. If one owner contributes significant funds and the other gains immediate access, it could be considered a taxable gift, potentially requiring a Form 709 filing if the amount exceeds annual gift tax exclusion limits.