Unit 4 - Session 14 - Type of Client Flashcards
What is required when opening a new customer account?
- ) Legal Capacity
- ) employment information
- ) Customer Identification Program (CIP)
Individual Account
For a person, trust, or a decreased person through an estate and the account holder is the only person who can (unless given legal permission):
- ) control the investments in the account
- ) request distributions of cash or securities form the account
Tenants in Common (TIC)
Provides ownership that a deceased tenant’s fractional interest in the account is retained by that tenant’s estate and is not passed to the surviving tenant(s). Accounts do not have to be of equal ownership. Checks or distributions must be made payable to the account name and endorsed by all parties.
Joint Tenants with Right of Survivorship (JTWROS)
Ownership stipulates that a deceased tenant’s interest in the account passes to the surviving tenant. Regardless of contributions, each account owner has an equal and undivided interest in cash and securities in the account. Joint Tenants mean JTWROS. Checks or distributions must be made payable to the account name and endorsed by all parties.
Transfer-on-Death (TOD)
Simplest way to keep assets held in brokerage accounts from becoming subject to probate upon a client’s death. Upon the owner’s death, the property is immediately transferred to the named beneficiaries usually w/o any added costs (in whatever % they desire). The only types of accounts that can be opened with a TOD are individual accounts and JTWROS. Aka know as Payable-on-Death (POD) and Totten trust (bank accounts that transfer to beneficiaries)
Tenancy by the Entirety
Ownership by two or more persons. Created only by married persons. In this form of ownership, consent of the other tenant is required before the other tenant can sell or give away his interest in the property. In death, the deceased spouse’s interest passes to the surviving spouse. Used most commonly with real estate. Checks or distributions must be made payable to the account name and endorsed by all parties.
Suitability
Putting the clients interests first
General Partnership
Unincorporated association consisting of two individuals. Partners are responsible for the operations and debts of the business. Partnerships allow the business’ profits and losses to flow directly through to the investors for tax purposes, thus avoiding double taxation of profits at individual levels
Limited Partnership
Management is assigned to the general partner while the limited partner(s) are passive and have liability limited to the investment.
Limited Liability Company
A business structure that combines the benefits of incorporation with the tax advantages of a partnership. The owners are members (not shareholders) and are not personally liable for the debts of the LLC.
S-Corp
Taxed like a partnership, offers investors the limited liability associated with corporations in general. Profits and losses are passed through to shareholders in proportion to their ownership. S-Corps cannot have more than 100 shareholders or more than one class of common stock. Losses can only be claimed to the extent of an investors basis in the shares. Basis includes money contributed or lent to the corporation.
C-Corp
Business structure that distinguishes the company as a separate entity from its owners. Used when a business believes it will need significant capital. corporate income tax applies and double taxation occurs. Has limited liability but no flow through taxation.
Trust
a legal entity that offers flexibility to an individual who wishes to transfer property.
Settlor
Aka as Grantor, Trustor, or donor - the person who supplies the property for the trust (also referred to as principal or corpus).
Trustee
Individual or other party holding legal title to property held for the benefit of another person. Must administer the trust by following directions in a trust agreement or will. Acts in a fiduciary capacity and obliged to perform in the interest of the beneficiaries.