Ownership forms for investment portfolios

18 November by Joe Byrne

Ownership forms for investment portfolios

Summary

A common question that comes up when setting up a new investment account for clients is which form of ownership should they adopt, (‘client type’ on some application forms). Should they use ‘tenants in common’ or ‘joint tenancy’?

What people generally want to know is which option is best for their particular situation. Below is a brief explanation of the difference.

If you are opening an investment portfolio with another person, be it a spouse, de-facto partner, between family members, or if you have a mixed family, you will need to choose between ‘tenants in common’ or ‘joint tenancy’. An important differentiator is what happens when one of the owners dies.

 

Tenants in Common

  • Allows people to own the investment account (the assets) in equal or unequal shares.
  • A major advantage of tenants in common is that it allows the assets to be transferred as per the instructions in each owner’s Will, (i.e. a life interest).
  • If a person does not have a valid Will, their share of the assets will be distributed in accordance with the provisions of the Administration Act 1969. It is therefore critical that owners have a valid Will in place that clearly sets out how the assets are to be dealt with after their death.

 

Joint Tenancy

  • This means that the asset(s) are owned equally by two or more people (‘joint tenants’).
  • Ownership interests are undivided and undefined.
  • In the case of one of the owners passing away, a joint tenancy allows all the assets to transfer to the surviving owner(s), (the right of survivorship). This means that when one of the joint tenants dies, their share in the assets will transfer to the surviving joint tenant(s). The interest in the assets therefore is not available for disposal under a Will or under an intestacy.

 

Questions to ask yourself

  • What form of ownership is my investment portfolio? Is it still appropriate?
  • Do I / We have a Will and if so, is it current?

 

If you do not have a Will and are not sure where to turn for help, give your Lifetime Adviser a call and they will be able to point you in the right direction.

 

Article by Joe Byrne, BA, AFA - Read More

 

This is ‘class level’ advice and is not personalised to any single client. It is meant to give a brief explanation of the common forms of ownership. You should always discuss your situation with your attorney and financial adviser to ensure you make the right choices.
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