5 Questions
- An individual opens an account with your firm. She tells you that upon her death, she wants any assets in the account to be divided equally among her three children. She also wants the ability to change the allocation in the event that conditions change and one of the children is in greater need than the others, but she does not want to incur any significant legal expense. You would suggest that the account be opened
A. as a joint account with right of survivorship
B. as a joint account with tenants in common
C. as an individual transfer on death (TOD) account
D. under a discretionary power
as an individual transfer on death (TOD) account
- If three individuals have a tenants in common (TIC) account with your firm and one individual dies, then
A. the two survivors continue as cotenants, along with the decedent's estate
B. the account must be liquidated and the proceeds split evenly between the two survivors and the decedent's estate
C.
trading is discontinued until the executor names a replacement for the deceased
D. the account is converted to joint tenants with right of survivorship
A. the two survivors continue as cotenants, along with the decedent's estate
- A corporation opening a brokerage account must present all of the following documents except
A. a new account form
B. an authorization from the state department of corporations
C. a copy of the corporate charter
D. a resolution of the board of directors
an authorization from the state department of corporations
- A trust formed during the grantor's lifetime that may be modified only by the original grantor is normally called
A. an irrevocable living trust
B. a revocable living trust
C. an A-B trust
D. a life insurance trust
a revocable living trust
- Which of the following investments would not be allowed in a custodial account?
A. Covered call options
B. Small-company stocks from an emerging market
C. Blue-chip stocks
D. Uncovered call options
Uncovered call options
Study Notes
Account Opening and Ownership
- An individual can open an account with the firm, designating that upon death, assets be divided equally among three children, with the ability to change the allocation if conditions change.
- This type of account is an individual transfer on death (TOD) account.
Tenants in Common (TIC) Accounts
- In a TIC account with multiple owners, if one individual dies, the two survivors continue as co-tenants, along with the decedent's estate.
- Trading is not discontinued, and the account is not converted to joint tenants with right of survivorship.
Corporate Account Documents
- A corporation opening a brokerage account must present a new account form, a copy of the corporate charter, and a resolution of the board of directors.
- An authorization from the state department of corporations is not required.
Types of Trusts
- A revocable living trust is a trust formed during the grantor's lifetime that can be modified only by the original grantor.
Custodial Accounts
- Covered call options, small-company stocks from emerging markets, and blue-chip stocks are allowed investments in a custodial account.
- Uncovered call options are not allowed in a custodial account.
Test your knowledge on financial account ownership types and inheritance preferences. Choose the most suitable account option based on the given scenario.
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