Appendix B: Glossary of Terms
Introduction
Welcome to the Appendix B: Glossary of Terms for the FINRA Series 7 exam. In this glossary, we will explore key terms that are crucial for understanding the securities market and essential for succeeding in the Series 7 exam. Understanding these terms is not only vital for passing the exam but also for performing effectively as a general securities representative. Additionally, this article includes quizzes designed to reinforce learning through sample exam questions.
Body
Understanding the terminology used in the securities market is critical for anyone preparing for the FINRA Series 7 exam. Below is a glossary of some of the most important terms you will encounter:
Joint Tenants in Common (JTIC)
- Definition: A form of joint ownership of an account where each owner holds an undivided interest in the property. Upon the death of one owner, the deceased’s share passes to their estate rather than to the surviving owner(s).
This type of ownership is commonly used in real estate transactions or investment accounts and offers flexibility regarding the transfer of an owner’s share upon death.
To visualize ownership breakdown in JTIC, here’s a Hugo-compatible Mermaid diagram:
graph TD;
A[Property] --> B[Owner 1];
A --> C[Owner 2];
B --> D{Deceased?} -->|Yes| E[Owner 1's Estate];
C --> F{Deceased?} -->|Yes| G[Owner 2's Estate];
Key Points for Series 7
- Accounts Ownership Structures: Differentiate between JTIC and other forms such as Joint Tenants with Rights of Survivorship (JTWROS).
- Estate Planning: Understanding implications for estate planning and tax consequences.
- Transfer of Assets: Recognize how assets are transferred upon the death of an account holder.
Conclusion
Mastering these key terms is fundamental to both the Series 7 exam and practical securities market operations. This glossary serves as a quick reference guide for revising essential terms, and quizzes included will help consolidate your understanding.
Supplementary Materials
Glossary
- Joint Tenants in Common (JTIC): A shared account form where each owner’s share passes to their estate.
- Joint Tenants with Rights of Survivorship (JTWROS): A shared account form where ownership automatically transfers to the surviving owners.
Additional Resources
- Investopedia: Investment Terms
- FINRA Official Resources
- Securities Industry Essentials Guide
Quizzes
Test your understanding of key terms with these quiz questions:
### Which form of joint account passes the deceased’s share to their estate?
- [x] Joint Tenants in Common (JTIC)
- [ ] Joint Tenants with Rights of Survivorship (JTWROS)
- [ ] Community Property
- [ ] Sole Proprietorship
> **Explanation:** In JTIC accounts, the deceased's share passes to their estate, unlike JTWROS.
### Joint Tenants with Rights of Survivorship means:
- [x] Ownership transfers to the surviving owner automatically
- [ ] Ownership transfers to the estate of the deceased
- [ ] Ownership is shared equally at all times
- [ ] Each party manages their share independently
> **Explanation:** In JTWROS, the deceased's share automatically transfers to the surviving owner(s).
### A key advantage of JTIC accounts is:
- [x] Flexibility in estate planning
- [ ] Automatic transfer of shares to survivors
- [ ] Avoiding all forms of taxation
- [ ] Single ownership authority
> **Explanation:** JTIC accounts allow flexibility because the deceased's share goes to their estate, which can be managed according to their will.
### Which account type usually involves shared equal ownership?
- [x] Community Property
- [ ] JTIC
- [ ] JTWROS
- [ ] Corporate Account
> **Explanation:** Community Property accounts often assume equal ownership among married couples.
### Which ownership form is primarily used in investment accounts?
- [x] JTIC
- [ ] Trust Account
- [x] JTWROS
- [ ] Individual Retirement Account
> **Explanation:** JTIC and JTWROS are common for investment accounts due to their distinct asset transfer structures.
### How does an account's property transfer differ in JTIC from JTWROS?
- [x] JTIC to estate; JTWROS to survivor
- [ ] JTIC to survivor; JTWROS to estate
- [ ] Both to estate
- [ ] Both to survivor
> **Explanation:** JTIC transfers ownership to the deceased's estate, while JTWROS transfers to the survivor(s).
### True or False: JTIC accounts allow immediate liquidation upon death.
- [ ] True
- [x] False
> **Explanation:** JTIC accounts transfer ownership to the estate, which must be processed before liquidation.
### What is a critical consideration for JTIC accounts?
- [x] Estate implications
- [ ] Share market price
- [ ] Federal income tax avoidance
- [ ] Immediate transfer to a spouse
> **Explanation:** Estate implications are crucial, as they impact how assets are distributed after death.
### How do JTIC accounts affect estate taxes?
- [x] Possible estate taxes depending on the deceased's share
- [ ] Exemption from estate taxes
- [ ] Automatic reduction
- [ ] Fixed estate tax rate
> **Explanation:** Depending on the estate's value, the deceased's share in a JTIC account may incur estate taxes.
### Are JTIC accounts suitable for joint ownership without estate implications?
- [ ] True
- [x] False
> **Explanation:** JTIC accounts inherently involve estate implications as part of their structure.
By understanding and quizzing yourself on these critical terms, you enhance your knowledge and preparedness for the Series 7 exam.