Master the different account types tested on the CIRE exam: Individual accounts, JTWROS, Tenancy in Common, Corporate accounts, Trust accounts, and more. Know the estate implications and suitability for each.
Account Types: A Core CIRE Topic
Understanding the legal structure, ownership implications, and suitability of different account types is essential for the CIRE exam. This knowledge appears in Elements 2 and 3.
Individual Accounts
- Ownership: One legal owner who is fully responsible
- Estate Implications: Upon death, assets become part of the deceased's Estate and are frozen until the will is probated
- Exception: In Registered Accounts (RRSP, TFSA), naming a beneficiary allows assets to bypass the estate and avoid probate fees
Joint Tenants with Rights of Survivorship (JTWROS)
The Rule: "Last person standing takes all."
- Scenario: Husband and Wife own a JTWROS account. Husband dies.
- Outcome: Wife automatically becomes 100% owner immediately. Assets bypass the estate entirely.
- Suitability: Standard structure for spouses/partners. NOT recommended for parents/adult children or business partners due to tax and control complications.
Joint Tenancy in Common (TIC)
The Rule: "What's mine is mine, what's yours is yours."
- Scenario: Business Partners A and B own an account 50/50. Partner A dies.
- Outcome: Partner A's 50% goes to their Estate (distributed per their will). Partner B keeps only their own 50%.
- Suitability: Best for business partners or friends who want their share to go to their own families, not the other account holder.
Corporate Accounts
The "Client" is the Corporation itself—a separate legal entity from the business owner.
Required Documents:
- Corporate Resolution: Board authorization specifying who can trade
- Articles of Incorporation: Proof the company legally exists
- Beneficial Ownership: Under AML rules, identify all individuals who own or control 25%+ of the company
Trust Accounts
A legal arrangement where one person holds assets for another's benefit.
Key Players:
- Settlor: Contributes assets into the trust
- Trustee: Manages the account and gives trading instructions
- Beneficiary: Eventually receives the assets (e.g., child at age 25)
Important: The advisor must follow the Trust Deed's investment constraints, not just general suitability.
Power of Attorney (POA)
- Limited POA (Trading Authority): Can make buy/sell decisions but CANNOT withdraw money
- Full POA (General): Can trade AND withdraw money/securities
- Compliance: POA document must be on file before accepting any orders from the Attorney
- Red Flag: An Attorney transferring money to their own personal account is a major gatekeeper concern
Discretionary vs. Managed Accounts
| Feature | Discretionary Account | Managed Account |
|---|---|---|
| Nature | Temporary accommodation | Permanent business model |
| Duration | Max 12 months (renewable) | Ongoing |
| Who trades? | RR with special approval | Portfolio Manager |
| Standard of care | Duty of Care | Fiduciary |
Margin Accounts
An account where the client borrows money from the dealer to buy securities (leverage).
- Requires a signed Margin Agreement
- Dealer can sell securities without notice if account value drops (Margin Call)
- NOT suitable for: Seniors, students, low risk tolerance clients, fixed income clients
Exam Tip: Account Type Scenarios
The CIRE frequently tests account type selection. Remember:
- Spouses → JTWROS (survivorship)
- Business partners → Tenancy in Common (assets to own estate)
- Protecting assets from creditors → Consider corporate structure or trust
- Client needs leverage → Margin (but assess suitability carefully)