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When Should You Use a Joint Brokerage Account?


Joint brokerage accounts, of which there are several types, are shared by two or more people. There are some advantages to opening a joint brokerage account with your spouse, a relative or a business partner. There are also some potential disadvantages, including financial ones. If you’re considering opening up a joint brokerage account, it’s a good idea to speak with a financial advisor first. SmartAsset’s free financial advisor matching tool can help you find advisors who serve your area.

What Is a Joint Brokerage Account?

Brokerage accounts allow investors to buy and sell a variety of financial investments, including stocks, bonds, mutual funds and ETFs. And joint brokerage accounts are shared by two or more people looking to pool investments, make investment management easier or simplify estate planning.

If you and another party or parties want to open a brokerage account together, you can do it as a non-retirement account. Traditional retirement accounts like 401(k)s and individual retirement accounts (IRAs) do not allow joint ownership of brokerage accounts.

Joint brokerage accounts are usually used by spouses, relatives, partners and business associates, but it’s important to remember that a joint brokerage account be opened between any two adults who share mutual financial goals.

Types of Joint Brokerage Accounts

A young couple discusses whether to open a joint brokerage account

There are several types of joint ownership, each with specific nuances. If you are planning on opening a joint brokerage account, pay close attention to these three common types of ownership so you can open one that fits your particular circumstances:

  • Joint tenants with rights of survivorship. This type of joint brokerage account has the provision that if one owner dies, the other gets the money in the account in its entirety. During both owners’ lifetimes, they both have full ownership of the assets in the account.
  • Tenants by entirety. This type of account is used mostly by married owners who hold joint property. For one spouse to make changes to the account, they must have consent from the other spouse. When one spouse dies, the other spouse gets the account in its entirety.
  • Tenancy in Common. Both account holders have complete control of the account, but they each own a pro-rata share of the assets. When one account holder dies, their estate determines what to do what their pro-rata share. The other account holder keeps their share of the account.

It is important to make the correct selection for your circumstances when you set up your joint brokerage account. Otherwise, problems could arise in the case of divorce or death.

Pros of Joint Brokerage Accounts

A joint brokerage account can be accessed by any of the parties at any time, which can be a major upside. Trades can be made, balances checked and funds deposited. Access is particularly important if one of the account holders dies since the other one can continue using the funds without having to wait for probate, which could take a year or longer.

A joint brokerage account can also simplify estate planning. With joint tenancy with rights of survivorship or tenancy by entirety, the surviving account holder will automatically receive the proceeds of the account if one account holder dies. This significantly simplifies estate planning and may allow the surviving account holder to skip probate. This holds true no matter what the deceased person’s will says.

Finally, joint brokerage accounts allow the pooling of resources. This allows both account holders to take advantage of lower fees and transactions costs and the power of compounding of interest. This can be hugely helpful for all parties involved.

Cons of Joint Brokerage Accounts

Joint brokerage accounts don’t allow the designation of beneficiaries. If the joint owners were to die at the same time, the account could be put in probate for that process to sort out how the money should be distributed, which could take one year or longer.

Joint brokerages are also at greater risk from creditors. If one of the owners of a joint brokerage account encounters trouble with debts and creditors, the joint account could be seized if the creditors come after the assets of one of the individuals. That puts the other individual in financial jeopardy.

If you own a joint brokerage account with someone other than your spouse, any deposits you make into the joint account could be deemed a gift to the other account holder, which could trigger gift tax liabilities. Depending on the laws in your state, the gift tax could be triggered when you deposit the money or when you withdraw the money. Check with an attorney or your tax accountant in this case.

On top of it all, joint brokerage accounts require a certain degree of trust . If you own a joint account with your spouse and there was a divorce, or if you have a falling out with the other account holder, then you run the risk of one party selling off assets. This could be devastating to family or business relationships.

Bottom Line

A financial advisor discusses joint brokerage accounts with a client

Weigh your options carefully before opening an joint brokerage account. If you have any trust issues with a family member or a business partner, there are other ways to be sure the heir of your choice has access to your money if you were to die, like durable powers of attorney or trusts. If one account holder contributes more to the joint brokerage account than the other, there may be a source of conflict. Another source of conflict could reside in the trust each has for the other.

Tips For Investing

  • Investing is often easier when you’re working with a financial professional like a financial advisor. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have free introductory calls with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • Estate planning and planning for your financial future can be complicated. SmartAsset has you covered with tons of free online resources. For inheritance laws by state and other great estate planning tips, look at SmartAsset’s Estate Planning Guide.

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