Should I Take Distributions from my Taxable Account or IRA?

It is commonly considered sound financial planning to take withdrawals from taxable accounts before withdrawing money from an IRA. Assuming the funds have been invested at least a year, withdrawals from taxable accounts are subject to favorable capital gains tax rates (no more than 15%) as compared to IRA withdrawals that are taxed at ordinary income rates (as high as 35%). Additionally, why not take distributions from a taxable account and maximize the tax-deferred benefit of the IRA?

Allow me to suggest one scenario where the traditional logic may not hold. Suppose an older individual is more concerned with passing assets to heirs than outlasting their nest egg. Further, assume this individual is in a reasonable marginal tax bracket (25%) and their heirs are in a higher tax bracket. Does it make sense for this individual to take distributions from their IRA now and pay taxes at the more favorable rate of 25% in order to prevent their heirs from paying taxes at a higher rate later? Absolutely. In addition, if this individual dies and leaves an appreciated taxable account to their heirs, the heirs receive a "step-up" in basis on this account, meaning all growth will be passed tax-free.

In sum, the individual can either pay capital gains tax on their taxable account and leave the IRA assets to their heirs to pay taxes on at a higher rate, or they can pay taxes on the IRA account at a lower rate than the heirs would be subject to and pass the taxable accounts on tax-free.