Do IRA Beneficiaries Go Through Probate? Guide to Protecting Your Inheritance
Most IRA beneficiaries avoid probate if a beneficiary is named. However, probate may be required if: No beneficiary is listed, The named beneficiary is deceased, The estate is the beneficiary.
Table of Contents
Why IRAs Typically Avoid Probate
IRAs (Traditional, Roth, SEP, SIMPLE) are non-probate assets when beneficiaries are properly designated. Here’s why:
- Beneficiary Designations Trump Wills: Retirement accounts bypass probate and transfer directly to the named person or entity.
- Immediate Access: Beneficiaries claim funds by submitting a death certificate and ID to the financial institution.
When IRA Beneficiaries Do Go Through Probate
Probate becomes necessary in these scenarios:
1. No Beneficiary Named
- If the IRA owner didn’t designate a beneficiary, the account defaults to the estate and goes through probate.
- Example: Your father’s IRA lists no beneficiary. The court distributes it via his will (or state law if no will exists).
2. The Beneficiary Dies Before the IRA Owner
- If primary and contingent beneficiaries predecease the owner, the IRA becomes part of the estate.
3. The Estate Is Named as Beneficiary
- Naming your estate as beneficiary forces probate, subjecting the IRA to court delays, creditor claims, and higher taxes.
How to Ensure Your IRA Skips Probate?
- Name Specific Beneficiaries
- List individuals (e.g., “John Smith, SSN 123-45-6789”)—not “my estate” or “my children.”
- Update Beneficiaries Regularly
- Revise after major life events (marriage, divorce, births, deaths).
- Use Contingent Beneficiaries
- Add backups to avoid lapsed designations.
- Consider a Trust
- A properly drafted IRA trust can manage funds for minors, special needs heirs, or spendthrift beneficiaries.
Related article for you:
Can I Fire My Probate Attorney?
Tax Implications for Inherited IRAs
- Traditional IRAs: Withdrawals taxed as income (except nondeductible contributions).
- Roth IRAs: Tax-free if the 5-year rule is met.
- 10-Year Rule: Most non-spouse beneficiaries must empty the account within 10 years (post-SECURE Act).
State-Specific Risks
- Community Property States (TX, CA, AZ, etc.): Spouses may have rights to IRA funds, even if not named.
- Medicaid Recovery: States can claim IRA assets to repay long-term care costs.
What Happens If the IRA Goes Through Probate?
- Delays: Probate can take 6–18 months.
- Creditor Claims: Debts are paid before heirs receive funds.
- Higher Taxes: Estates face compressed tax brackets (up to 37% federal).
Checklist for IRA Owners
Name primary and contingent beneficiaries.
Review beneficiaries every 3 years.
Avoid naming your estate.
Consult an estate attorney for complex cases.
Need Help?
This article is for informational purposes only. Consult an estate planning attorney or tax advisor for personalized guidance.