Switch to ADA Accessible Theme
Close Menu
Call For A Confidential Case Evaluation 941-366-1800

Simple Steps to Avoid One of the Most Common Estate Planning Mistakes


There is one major mistake that every level of wealth seems to make when it comes to estate planning, and it has to do with how they allocate assets amongst their beneficiaries and any charities they’d like to donate to, and whether that wealth comes from their IRA or other assets, such as a home and/or savings account.

As we discuss below, listing charities as part of a revocable trust or will should be done with a consideration of income tax consequences so as to maximize benefits to all beneficiaries. By making a simple tweak, you can ensure that as much of your assets as possible, instead, end up where you intended.

Think About the Tax Repercussions for Every Decision

Let’s say that you decide to leave your IRA and house to your children and $100,000 of the after-tax savings to a charity—a common scenario for many couples. The problem with this is that – whether or not your children take the IRA distributions immediately or over time – these funds are income-taxable to your children when passed on in this manner, and they don’t have to be.

Alternatively, if you leave $100,000 of the IRA to a charity, you end up donating the least tax-efficient assets to the charity instead of your children. This makes sense because the charity won’t have to pay taxes on those funds, and in doing so, your children receive more on an after-tax basis.

Coordinate Beneficiary Designations with Your Will or Trust

So how can a couple go about doing this? As many know, the IRA beneficiary designation is a form one fills out – either through an investment broker or their employer – designating who gets their IRA in the event of their death. Their trust or will is then drafted and amended by their estate planning attorney. Though it may be obvious, many people do not realize that one of the first, most important steps is to coordinate these two instruments so that your goals are accomplished at the least expense to your beneficiaries.

However, keep in mind that, when it comes to a Roth IRA, your heirs will always be free of income tax because taxes have already been taken out of Roth funds; therefore, it does not make sense to leave these funds to a charity.

Contact an Experienced Florida Estate Planning Attorney

When it comes to estate planning, remember that what matters is not just “who gets what,” but also “who gets which.” As you can see, taking one wrong turn can take you and your family in the wrong direction, with serious consequences. It also means that the people and organizations that matter to you don’t necessarily get what you intended them to.

If you live in Florida, contact our team of highly experienced estate planning attorneys at Suncoast Civil Law to find out how we can help you stay protected.