There are times when it may make sense for you to title your bank and brokerage accounts in a way that gives another party the same authority and rights to the accounts as you have. Typically, this scenario arises with spouses who want equal access to marital property, but it can also become an issue whenever parties want to ensure that everyone is on the account as a principal. Financial institutions use a modified form of real property law that combines the rights of joint tenancy and tenancy in common to designate different types of joint ownership interests in financial and investment accounts. There are three typical types of joint tenancy for these accounts: joint tenancy in common (JTIC), joint tenancy with the right of survivorship and joint tenancy in the entirety. The rights of joint account holders to access, control and dispose of the money and assets in the account are not only subject to traditional property law regarding joint tenants, they can also be affected by state and federal law and the particular procedures put in place by the financial institution.
Right of Ownership in the Entirety
The basic legal premise behind jointly owned property is that each owner possesses an individual, undivided ownership interest in the property. Functionally, this means that each owner is considered the owner of the entire property. When an owner goes to transact business concerning the property, he does not have to prove he has a majority interest in the property or permission from the majority of owners to proceed. An individual owner can function as if he owns 100 percent of the property. While this is true for financial and investment accounts functionally, in fact, an owner of a JTIC account can own an unequal percentage of the account for distribution purposes because of the hybrid nature of combining the features of a joint tenancy with a tenancy in common. Financial institutions will presume an equal pro rata ownership percentage, but the owners can agree to unequal percentages.
Right to Access
Each joint tenant has the right to access the account. By default, this means that any owner can walk into a financial institution and make a deposit, request a balance, request copies of statements and otherwise access the account without receiving permission from the other owners. Certain financial institutions allow joint tenants to implement access-control procedures, such as requiring double signatures on checks or explicit permission of all owners for certain types of account transactions. However, most financial institutions shy aware from undertaking this responsibility for joint accounts, while others will allow the joint account holders to put the procedures in place but will not accept enforcement responsibility. This means that the financial institution will allow joint account holders to adopt a policy requiring two signatures on a check, for example, but will accept a check presented with only one signature.
Right to Transact
Each joint account holder has the right to initiate transactions. For example, a joint holder of a JTIC brokerage account can initiate a trade without consulting other owners. Some brokerage firms will allow joint account holders to adopt transaction restrictions, such as establishing an upper limit for transactions without approval of all owners, but these sorts of restrictions differ by financial institution and represent a deviation from the default provisions of joint tenancy law.
Right to Withdraw
Each joint tenant has the right to withdraw, transfer or close the account. This right comes from the legal basis of joint tenancy law that gives every owner equal ownership rights. The fact that the account is also designated as "in common" means that each tenant can have an unequal ownership percentage and has the right to dispose of that percentage as he sees fit. In practice, this right means that a joint account holder can empty an account without authorization from the other owners, and the financial institution cannot be held liable for disbursing the money; however, the owners can go to court under state and federal law to prove that the assets in the account were unequally owned and a single party was not entitled to withdraw the entire amount.
Right to Bequeath
The main distinction between a JTIC and a joint tenancy with the right of survivorship and a joint tenancy by the entirety is the right to bequeath an owner's interest in the account to his beneficiaries. The other two types of joint tenancies require the automatic transfer of an owner's interest in the account to the other owner upon death. An owner of an account held by JTIC can leave his interest in his will to his children, spouse, favorite charity or to any other person or entity.