Shared goals and growth

Joint brokerage accounts offer a collaborative approach to investing.

When it comes to investing, you don’t have to do it alone. Whether you’re planning for the future with your spouse, growing wealth with a family member, or expanding your goals alongside a business partner, a joint brokerage account allows you to share the opportunities and responsibilities that come with growing your money together. 

What is a joint brokerage account?

A joint brokerage account is an investment account owned by two or more people. It is frequently used by married couples, siblings or business partners to invest together, allowing each account holder to contribute funds toward investments and make trading decisions together.

How do joint brokerage accounts work?

Each account holder typically has equal rights to make trades, manage the investments, and access account information. While you may have a financial advisor to open and manage the account for you, each account holder retains equal authority.

Types of joint brokerage accounts

There are three main types:

Tenancy in common: Each account holder owns a certain percentage of the account, but has full access to the entire account. Your ownership percentage determines how the account is divided for tax purposes and can be passed on to an heir.

Joint tenancy with rights of survivorship: Each account holder has equal share in the account. If one account holder dies, ownership passes to the surviving account holders.

Tenancy by the entirety: This type of account is available to married couples. Ownership automatically passes to the surviving spouse if one spouse passes away. This type of account may provide certain legal protections like protection from creditors or lawsuits, depending on your state’s laws.

Are joint brokerage accounts subject to probate?

This depends on the type of account. With tenancy in common, because each account holder can pass their ownership percentage on to an heir, when they die their percentage is handled as part of their estate and subject to the probate process. In contrast, with joint tenancy with rights of survivorship, ownership passes to the surviving owner in the event the other account holder dies, bypassing probate. Married couples or business partners often chose this type of account for this reason. Similarly, with tenancy by the entirety, because it is a type of joint ownership that includes right of survivorship for the surviving spouse, it would not be subject to probate.

Pros and cons of joint brokerage accounts

Some advantages of joint brokerage accounts include:

Greater investment power: Because you’re able to pool your resources with your fellow account holder(s), this may have the benefit of a more diversified portfolio with potentially higher returns.

Streamlined record-keeping: These accounts provide one consolidated statement covering all trades and income earned from the account, making it easier to track activity. However, if multiple people share tax responsibility, dividing income and gains for tax reporting can be more complex.

Collaborative control: With a joint brokerage account, each account holder has equal rights and responsibilities, allowing you to participate equally in decision-making and oversight.

Some potential drawbacks are:

Possibility for tension: It may cause conflict if you and the other account holder(s) have different investment goals or risk tolerances.

Personal financial risks: You can be subject to liabilities from things like securities trading or account fraud if your fellow account holder makes such transactions. Working with an advisor can reduce this risk, but it’s still worth considering.

Unrestricted access: Each account holder has access to the entire account, creating the risk that either account holder could fully deplete the account, either purposefully or accidentally, without needing the other’s permission.

It is important for all account holders to prioritize communication and agree on investment goals and risk tolerance, so you can help to avoid conflict and work together as a team.