Joint tenants in common (JTIC) is a type of brokerage account with two or more owners who do not have rights of survivorship. Typically joint tenants in common own equal percentages of the account. If one owner dies, their share of the account becomes part of their estate. The advantage of a JTIC account is that the owner can designate the heir of their choice. The disadvantage of a JTIC account is that it must go through probate before the account can be transferred, which can be long and expensive.
Tenants in common is a property law concept that is applicable in many countries, but the exact phrasing and legal impact can vary from jurisdiction to jurisdiction. In general, it means that each co-owner has the right to bequeath their share of the property to whomever they choose through their will. Often times when opening a joint tenants in common account, the paperwork from the broker allows for a beneficiary to be chosen on the spot.
One of the main advantages of a joint tenants in common account is that each party owns outright a portion of the account. In the case of death or divorce, it is easily divisible. The rest of the account remains intact while the deceased share can be passed on pro-rata.
The other advantage of a JTIC account is the control over its inheritability. The owner can decide to whom, when and under what circumstances part or all of the account should be transferred. This is important when setting up trusts for minor grandchildren, settling disputes between adult children or preventing family fortunes from being lost to new spouses.
The biggest disadvantages of joint tenants in common accounts stem from the fact that probate courts are involved. Once an owner has died and their share of the account has become part of their estate, the transfer process can be long and complicated. Lawyers are often involved, making the ordeal expensive. As with other types of inheritances, the beneficiary selected in the will can be contested.
An alternative type of joint account is called joint tenants with rights of survivorship, which is often favored by married couples. In the case of the death of one party, the other party inherits the rest of the account, immediately and automatically. This form of co-ownership is also found frequently with joint credit cards. Unfortunately the survivor also inherits the credit card debt.
