What Happens To An IRA When You Die

Your IRA passes directly to the beneficiaries you named on the account, bypassing probate. Those beneficiaries can then take distributions, but the rules and tax treatment depend entirely on their relationship to you and when you passed.

The beneficiary form overrides inherited IRA rules

The IRA beneficiary designation form is a legally binding contract between you and the custodian. It supersedes any conflicting instructions in your will or revocable trust. If you name your sister as the primary beneficiary on the IRA form but your will leaves the account to your spouse, the sister inherits the IRA. Courts routinely uphold this hierarchy because the IRA is a non-probate asset. The only exception is if you live in a community property state and your spouse did not sign a waiver. Even then, the form still controls for the portion you can direct. To avoid confusion, check your custodian's online portal or request a copy of your current designation form every few years. This is especially important after divorce, marriage, or the birth of a child.

Spouses get the most flexibility

A surviving spouse is the only heir who can treat the inherited IRA as their own by rolling it into an existing or new IRA in their name. This option, which includes a direct rollover pension to IRA if the decedent had a pension rolled into the account, allows the spouse to delay required minimum distributions until they turn 73 and name their own successors. Alternatively, the spouse can remain as a beneficiary and take distributions over their own life expectancy. This typically forces earlier withdrawals. The key advantage of the rollover is unlimited tax-deferred growth. If the spouse is younger than 73, they owe no RMDs until their own RMD age. For a Roth IRA, a spouse who rolls over the account inherits the tax-free status and never owes RMDs during their lifetime.

Non-spouse heirs and the 10-year rule

Under the SECURE Act, most non-spouse successors, such as adult children, siblings, or friends, must empty the inherited IRA within 10 years of the original owner's death. This is known as the 10-year rule. A common mistake is assuming they can still stretch distributions over their own life expectancy. Unless the heir is a minor child, a disabled person, or someone not more than 10 years younger than the decedent, the entire account must be withdrawn by December 31 of the year containing the 10th anniversary of the death. There is no annual minimum for those 10 years. Taking nothing until year 10 can push the recipient into a high tax bracket, especially if they inherit a large traditional IRA. For inherited Roth IRAs, the same 10-year rule applies. All distributions are tax-free because contributions were already taxed. The 5-year rule applies only if the original owner died before their RMD start date and the heir is the estate or a non-qualified trust. Those recipients must empty the account within five years instead of ten.

When no recipient is named

If you fail to name a successor, or if all named individuals predecease you and no contingent is listed, the IRA becomes part of your probate estate. This is a worst-case scenario. The account then goes through probate court, which is public, time-consuming, and costly. The estate itself cannot stretch distributions. Instead, the IRA must be distributed under the 5-year rule if you died before your RMD start date. If you died after, it must be distributed over the deceased owner's remaining single life expectancy. Either way, the payout timeline is compressed. The income taxes on a traditional IRA become due faster, often pushing the estate into higher tax brackets. To avoid this, always list at least one primary and one contingent heir on your IRA form. Review it after any major life change. For a comprehensive overview of inheritance strategies, the hub iras provides detailed guidance on naming successors and avoiding probate pitfalls.

This means your carefully drafted will or trust does not control the IRA. Only the beneficiary form you filed with your IRA custodian matters. Updating that form after major life events is critical.