Do IRA Funds Go Through Probate?

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IRAs and other retirement accounts have designated beneficiary forms where you may select who will receive your account upon your death and in what proportion. If you fill this form out correctly, your IRA assets will be available to your beneficiaries nearly immediately after your death, and they will not go through probate court. Failure to complete or change the beneficiary form may result in an undesirable or slow distribution of the account.

Beneficiary Form

The first thing to do with any IRA or retirement plan is to fill out the beneficiary form. This form is available from your IRA provider and may be updated as often is necessary.

Fill out the beneficiary form with specific names and instructions. You usually need the full name of any beneficiaries, whether they are people or organizations, and a tax identification or Social Security number for each. Provide current contact information as well.

List a specific percentage of the account for each beneficiary, especially if you do not intend to divide the account evenly.

List contingent beneficiaries. If your first choice for distribution is not available due to a death, list a second choice. It is important to do this -- if the worst happens, you have made your choices known.

Estate as Beneficiary

If you list your estate as the beneficiary of the IRA, your account will go through probate and will be distributed by a judge unless you leave specific instructions for it's division in your will. This removes the tax-deferred benefits of traditional IRAs, as estates must take a full distribution of the funds immediately and pay the associated tax on the withdrawal. Your designated beneficiaries (through the beneficiary form) are allowed to take their distributions over time and draw out the tax deferral benefit.

Special Circumstances

In some cases, you may not want the IRA to go directly to a beneficiary. The beneficiary may be severely disabled and unable to care for herself. He may be very young and require assistance with his financial decisions. You may have a spendthrift child who is unable to manage money in a manner you find appropriate. In these kinds of cases, consider a trusteed IRA or designating a trust as the beneficiary of your IRA. Both options allow you to place constraints on the manner of distribution to the beneficiary.

With a trusteed IRA, you set up a third party to manage the account and control the flow of distributions. While the IRA must still be distributed on a regular schedule, the trustee can ensure that the distributions are kept to a minimum and that account investments are appropriate for the situation.

If you designate a trust as an IRA beneficiary, the trust holds the required minimum distribution until it is needed. The trust is responsible for any income tax that is due on distributions. With a trust, you can designate the amount and manner of distributions to any final beneficiaries, earmarking the money for educational, health or other expenses.

Spousal Rules

It is important to remember that a spouse is allowed to treat the IRA as her own. If this happens, she may also choose to change the beneficiary designation on the account. In addition, if she remarries and does not designated new beneficiaries the account will go to her next of kin -- the new spouse -- upon her death, not to your secondary beneficiaries.

You can avoid this situation by dividing the account among all your heirs, or setting up a trust (with it's own distribution arrangement) as the beneficiary of the IRA.


In the majority of cases, your IRA beneficiary form will trump any will you may have. If you designate a spouse as the beneficiary of your account and later become divorced, that person will remain your beneficiary until you change the form.

It is also important to note that at the time of this writing in 2010 the Federal government does not recognize same-sex marriages or non-married heterosexual partners as spouses. You must designate your partner as a beneficiary for them to inherit your IRA, if not it will go to your next of kin (your parents or siblings in most cases).