Certified Trust and Fiduciary Advisor (CTFA) Practice Exam

A will substitute refers to a mechanism that allows assets to pass directly to beneficiaries without the need for probate, similar to how a will functions. Joint tenancy with right of survivorship is an example of a will substitute because it allows property to automatically transfer to the surviving owner(s) upon the death of one owner, bypassing the probate process entirely.

In joint tenancy, when one owner dies, their share of the property does not become part of their estate. Instead, it instantly transfers to the surviving owner(s). This characteristic ensures quick and efficient transfer of assets, which is a primary goal of will substitutes, as probate can be time-consuming and costly.

Other options, while relevant to estate planning, do not function in the same way. Trust funds established during life can serve similar purposes but are distinct from direct ownership transfer mechanisms, as they may involve a fiduciary management process. Health savings accounts are specifically designed for medical expenses and do not have the same intent as will substitutes. Corporate stock ownership alone does not guarantee a transfer mechanism like joint tenancy does; the transfer of ownership might still require going through probate unless structured otherwise.