Should You Name Your Estate the Beneficiary of Your IRA?

As we have discussed in other articles, most specifically in the article “Choosing a Beneficiary for Your IRA”, one of your options to name as your beneficiary is your estate.  Actually, if you neglect to name a beneficiary at all for your IRA altogether, your estate is the default beneficiary.

So, if your IRA for some reason winds up in this position, what are the consequences?  Listed below are a few reasons you should not name your estate the beneficiary of your IRA – intentionally or unintentionally – as well as a few reasons you might want to do this.

Reasons You Should NOT Name Your Estate

Tax deferral is lost. In order for the tax-deferred nature of an inherited IRA to play out, the beneficiary must have a life expectancy (to determine what the Table I factor will be, of course).  Your estate does not have a life expectancy, therefore it cannot take RMDs.  If you have not started taking RMDs (Required Minimum Distributions), the entire account will be distributed and taxable over a maximum of five years after the year of your death.  (Note: If you have begun taking your RMDs, tax deferral can go on for the remainder of your life expectancy, which will provide some relief for your heirs.)

Account must go through probate. Depending upon the complexity of your estate, this can take a significant amount of time to resolve, and can deny your heirs access to your account in the meantime.  Why cause this kind of delay for your heirs if you don’t have to?

Creditors can access. If your estate will have significant debts to repay, having the IRA account in the estate will potentially subject the IRA to attachment by the creditors.  This is in opposition to the situation where you name your own heirs to the account – the estate’s creditors will not have access to the IRA assets.

Reasons You Might Want to Name Your Estate

Stretch provisions not likely to be utilized. If the account is somewhat small, and the tax bracket(s) of your beneficiary(s) is low, the stretch provision may be relatively meaningless.  For example, with a $50,000 IRA being distributed to three beneficiaries with little or no other income, the effective tax rate if distributed would be between 10% and 15%, a relatively small amount of tax would be paid on that portion of the estate.

Instead of a trust. If you wish to utilize a trust to help ensure that the heir doesn’t have to (or isn’t allowed to) determine the payout over a much shorter period of time than you believe is best, your will could direct assets to such a trust, including your IRA.  This way you only have one trust entity, administration of the payouts is simplified.  This is especially useful and efficient in a smaller estate, or if there are justifiable concerns about a spendthrift heir quickly dissipating the value of the account.

Intended beneficiary is older. As mentioned above, if you have begun taking RMDs from your account and your estate is the beneficiary, your estate will continue to receive RMDs for the remainder of your life expectancy.  If your intended beneficiary is someone older – naming that individual as the beneficiary will have the affect of accelerating the account payout, which may or may not be a positive thing.  Leaving the account to your estate keeps that acceleration from happening.


In summary, it is usually to your benefit (and the benefit of your beneficiaries) to name a specific person or persons as beneficiary of your IRA, for the reasons named above.  There are a couple of circumstances that may change your mind, but I think it’s probably safe to say that you can’t go too wrong by naming specific beneficiaries instead of your estate.

About the author

Jim Blankenship, CFP®, EA

Jim Blankenship is the founder and principal of Blankenship Financial Planning, Ltd., a financial planning firm providing hourly, as-needed financial planning and advice. A financial services professional for over 25 years, Jim is a CFP professional and has earned the Enrolled Agent designation, a designation that qualifies him as enrolled to practice before the IRS. Jim is also a NAPFA-registered financial advisor, which designates him as a Fee-Only Financial Advisor.

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  • Tom,

    You’re right, if things happen the way you’ve described then secondary beneficiaries would not be allowed to stretch the IRA and utilize RMD.

    However, if your wife would happen to pass away before you do, the contingent beneficiaries would be in line to receive the IRA and utilize the RMD.

    On the other hand, if you predecease your wife, she could take ownership of the account and name your sons as primary beneficiaries, allowing them to utilize RMD.

    Hope this helps –


  • Thanks for the article regading naming a person as one’s beneficiary of an IRA. I have named my wife as my primary beneficiary but as of now have not named a contingent beneficiary…as I have been of the feeling that at the death of my wife the balance would flow into her estate and she has a trust and will.

    I have 3 adult sons who would receive the money via her will. I did not think that they would be able to get RMD benefit as contingent beneficiaries. Correct my thinking. Sons are responsible and one probably would do the RMD if he qualifies.


  • Wouldnt another reason to name your estate be to give the amount of the IRA (or more) to multiple charities through your will when you know the charitable bequests will consume all the IRA-type assets, leaving non-IRD assets for individual heirs?

  • I have a Will in which 11 people are named to receive a gift of 9% of my primary remainder distribution. I rent, so I have no property. I have no car. What I do have is several money accounts. Three deferred annuity contracts, one life insurance policy, a pension from the State Teachers Retrement System, and several bank accounts(savings, checking, 1 CD, and a POD.) I have no relatives or friends who I want to name as beneficiaries on these accounts. All of these policies have “My estate” listed as the beneficiary. What are the ramifications of this situation when I die?

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