“They’ll Split It Later” Is One of the Biggest Estate Planning Mistakes I See

When Jim updated his retirement account beneficiaries after his wife passed away, he wanted to keep things simple.

He had four adult children, but instead of listing all four equally, he named only his oldest daughter, Courtney, as the sole beneficiary.

His reasoning sounded harmless enough:
“She’ll do the right thing and split it with her brothers.”

And to be fair, Courtney fully intended to.

That was the plan. Until real life got involved.

After Jim passed away, Courtney inherited the entire IRA directly into an inherited IRA in her own name. Her brothers assumed she would simply divide the account evenly.

What none of them realized was that legally and tax-wise, the money was now entirely Courtney’s.

Not morally. Not emotionally. Legally.

And once beneficiary paperwork is processed, financial institutions follow exactly what the form says, not what the family “meant” to do.

At first, Courtney tried to handle things informally. She began taking withdrawals with the intention of gifting portions to her brothers over time.

That’s when the tax problems started.

Every withdrawal from the inherited IRA became taxable income to Courtney personally. The larger the distributions, the larger her tax bill became. Suddenly, she was being pushed into higher tax brackets simply because her father thought naming one beneficiary would make things easier.

Her brothers, meanwhile, became frustrated because they assumed they would each receive their share directly. Instead, they now had to depend entirely on Courtney to distribute the money after taxes and navigate the legal and accounting issues herself.

And any amount over the annual exclusion needs to be reported come tax time.

Then came the resentment.

One brother questioned whether Courtney was intentionally delaying distributions. The other became suspicious about how much tax was actually owed. Yet, one was filing for divorce and didn’t want his inheritance to get commingled. Courtney’s daughter was going to college soon, and all of that extra income would show up on her FAFSA and CSS forms. She wants to do the right thing, but the timing was not perfect for anyone.

Conversations became tense. Lawyers entered the picture. Accountants got involved.

A family that genuinely loved each other suddenly found themselves fighting over logistics that their father thought he had simplified.

And this happens more often than people realize.

Parents will say things like:
“My oldest child is responsible.”
“She’ll divide it fairly.”
“He knows what I want.”

But wishes are not instructions.

When you name only one person as a beneficiary expecting them to later “do the right thing,” you are often creating:

• unnecessary taxes

• family conflict

• legal confusion

• delays

• emotional resentment during an already painful time

And the worst part is that it usually comes from trying to avoid paperwork or difficult conversations.

Jim could have simply listed each child directly as an equal beneficiary from the beginning. The financial institution would have handled distributions appropriately. Each child would have inherited their own portion directly. Each sibling would have maintained their own tax structure and timeline.

Instead, his shortcut created years of tension.

The emotional side of this matters just as much as the financial side.

When families are grieving, they are already emotionally raw. Even loving families can fracture under stress when expectations are unclear, and money gets tangled up together.

What’s especially heartbreaking is that these situations are almost always preventable.

Good estate planning is not about “keeping it simple” at all costs.

It’s about creating clarity.

Clarity prevents confusion.
Clarity prevents resentment.
Clarity protects relationships.

Because after someone passes away, the last thing a family should be doing is trying to untangle avoidable financial messes while they are also trying to mourn someone they love.

Do it correctly the first time.

Not because paperwork matters more than family.

But because family matters too much not to.

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This article is for educational purposes and does not constitute personalized financial advice. Always consult a qualified financial advisor before implementing complex financial strategies. See disclosures for more details.