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Saturday, November 26, 2022

Wills vs. Trusts

Conventional wisdom says that all adults should have a will in place, and many need to protect their assets with a trust. Evansville attorney Bill Bussing says it might be time to think differently — and save money. Bussing estimates he has written more than 2,500 wills and 500 trusts since he hung out his shingle 25 years ago on Washington Avenue. Now he’s writing fewer of both, in part because all but the very wealthy are exempt from estate taxes.

“Until last year, most Indiana residents faced inheritance tax and many people faced substantial federal estate tax,” according to Bussing. “Then last year, Indiana did away with its inheritance tax, and the new federal estate tax law allows couples to protect over $10 million. Let’s say a couple has less than $10 million, and three grown kids. They have bank and brokerage accounts, retirement accounts, IRAs, annuities, real estate, life insurance, and a couple of certificates of deposit.

“They simply want everything to pass to the surviving spouse at the first death, and to the children at the second death. I can accomplish that through beneficiary designations. They no longer need a trust to minimize taxes. And the will, if it’s helpful at all, is only there as a safeguard in case they failed to designate beneficiaries. You can put beneficiary designations on just about everything you own today.”

Bussing points out that power of attorney and health care directives are important for most families. Wills remain paramount for parents of young children as a way to designate guardians and direct finances in case of the parents’ deaths. Trusts are still valuable in structuring gifts to charities, making gifts to children at specific ages, or protecting a child through a special needs trust. In the past, trusts were often used to avoid probate. By skipping probate, families pay less in lawyers’ fees and court costs, and retain privacy. Today, simply listing beneficiaries for each asset can accomplish the same task, and you haven’t been forced to pay an attorney to create a trust.

“The estate plan I would recommend today for many people doesn’t even look close to the estate plan I recommended 25 years ago,” says Bussing. “They’ll come in and think they need a trust or a will. We’ll go down the list, they realize they don’t really need it, and they’re happy
to find that out.”

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