Most people assume that once they've written a will, they've taken care of who will inherit their assets. They may have named their spouse, children or other loved ones, worked with an attorney to put everything in writing and filed the documents somewhere safe.
But there's an important detail that can be overlooked. Your will generally doesn't determine who inherits your IRA.
Retirement accounts have their own beneficiary designations, and those instructions typically control what happens to the money when you die. If the information on file is outdated, incomplete or missing altogether, the outcome may be very different from what you intended.
Why Your Beneficiary Form Matters More Than You Think
When you open an IRA, you're usually asked to name one or more beneficiaries. These are the individuals or entities designated to receive the account after your death.
Unlike many assets that pass through a will, an IRA generally transfers according to the beneficiary designation maintained by the financial institution. That means the names listed on the account can carry more weight than the instructions in your estate-planning documents.
Consider someone who updates a will to leave retirement savings equally to two children but never changes the beneficiary information on the IRA itself. If the account still names a former spouse, or if no valid beneficiary is listed, the money may not pass to the children in the way the owner expected.
When no valid beneficiary designation is on file, the IRA agreement determines who inherits the account. Depending on the institution's rules, that could mean the account passes to a surviving spouse, other relatives or the owner's estate.
And if the estate becomes the beneficiary, the process can become considerably more complicated.
What Happens When an Estate Inherits an IRA?
An IRA left to an estate doesn't necessarily lose its value or become immediately taxable. However, the options for managing and distributing the money can be more restrictive.
Because an estate isn't an individual, it doesn't qualify for the same inherited IRA distribution rules available to certain named beneficiaries.
For a traditional IRA, the required distribution period depends partly on whether the original owner died before or after the date they were required to begin taking minimum distributions. In some situations, the account must be fully distributed within five years. In others, distributions are based on the deceased owner's remaining life expectancy.
An inherited Roth IRA generally follows the five-year rule when the estate is the beneficiary.
These rules can affect how long the money remains invested in a tax-advantaged account and when taxable distributions must occur.
There's also the administrative side. An executor may need to coordinate with the IRA custodian, establish the appropriate inherited accounts and determine how distributions should be reported. Depending on the circumstances, professional assistance may be needed to avoid mistakes.
A Recent IRS Ruling Shows Why This Matters
A 2026 IRS private letter ruling illustrates how a seemingly small oversight can create additional work for surviving family members.
In the case, an IRA owner had written a will leaving his traditional and Roth IRAs equally to two individuals. However, neither person had been named on the accounts' beneficiary designation forms. Under the IRA agreements, the estate became the beneficiary instead.
The estate's administrator wanted the assets divided into separate inherited IRAs without creating an immediate taxable distribution. The IRS approved the proposed direct transfers under the specific circumstances presented. That allowed the beneficiaries to receive their respective shares through inherited IRAs rather than having the assets distributed to the estate first. But the ruling didn't erase the original beneficiary issue. The accounts remained subject to the distribution rules that applied because the estate had inherited them. The family was able to address part of the problem, but only after navigating a process that might have been avoided with properly completed beneficiary forms. Private letter rulings apply to the taxpayers and facts involved and cannot be relied upon as precedent by other taxpayers. The case nevertheless offers a useful reminder that the way an IRA is inherited can matter just as much as who ultimately receives the money.
When Was the Last Time You Checked Your Beneficiaries?
Beneficiary designations are easy to forget because they usually don't require attention during everyday account management. You might have completed the paperwork decades ago, when your family and financial circumstances looked very different.
Marriage, divorce, the birth of a child or grandchild, and the death of a loved one are all reasons to revisit those instructions. Even without a major life change, periodically confirming the information on file can help identify mistakes or omissions.
Start by reviewing the beneficiaries listed on each IRA, 401(k) and other retirement account. Check both primary and contingent beneficiaries, including how the account would be divided if more than one person is named.
It's also worth confirming that the financial institution has accepted and recorded any changes you've submitted. A copy of an unsigned form or an instruction that was never processed may not accomplish what you intended.
If you've established a trust as part of your estate plan, beneficiary designations deserve particular attention. Naming a trust can be appropriate in certain circumstances, but inherited retirement account rules can become more complex, making coordination with your estate-planning attorney especially important.
A Small Detail With Long-Term Consequences
Estate planning often focuses on the larger decisions: who should inherit your assets, how your family will be provided for and what kind of legacy you want to leave.
But those decisions are only effective when the documents and account instructions work together.
A current will is important, but it doesn't replace the need to review the beneficiaries named on your retirement accounts. Taking a few minutes to confirm those designations today may help your loved ones avoid unnecessary complications later.
