It Passes Outside Your Will
Your IRA, 401(k), and other retirement accounts pass by the beneficiary form you filled out with the custodian, which overrides your will and trust. An out-of-date form, an ex-spouse still listed, a deceased parent never removed, is one of the most common ways people accidentally disinherit the family they meant to provide for. These forms may be the most powerful estate-planning documents you have.
The 10-Year Rule (the SECURE Act Change)
Most non-spouse heirs must now empty an inherited IRA or 401(k) within ten years of the owner’s death. The old lifetime "stretch" is largely gone. Since traditional-account withdrawals are taxable income, cramming them into ten years can push a working heir into higher brackets, so the timing of withdrawals is its own planning problem.
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"Eligible designated beneficiaries" can still stretch withdrawals over life expectancy: a surviving spouse (who can roll it into their own IRA), a minor child of the owner, a disabled or chronically ill beneficiary, and anyone less than ten years younger than the owner. For a disabled heir, a special-needs trust can be the beneficiary so the money does not cost them their benefits. A trust can also control the payout for a young or spendthrift heir, but only if it is a properly structured see-through trust, and you should never let the account default to your estate, which can force a faster payout (a 5-year deadline if death comes before required distributions begin) and runs the account through probate either way. Traditional accounts are taxed as income to the heir with no step-up; Roth accounts pass income-tax-free. We coordinate all of this with your financial advisor.
Frequently Asked Questions
Who Gets My IRA or 401(k) When I Die?
Whoever you named on the beneficiary form, not whoever is named in your will. Retirement accounts pass by beneficiary designation, which overrides your will and trust entirely. That is why an out-of-date beneficiary form is one of the most common causes of accidental disinheritance, the ex-spouse still listed on the 401k, the deceased parent never updated. Check your forms; they may be the most important estate-planning document you have.
What Is the 10-Year Rule?
Under the SECURE Act, most non-spouse beneficiaries who inherit an IRA or 401k must withdraw the entire account within ten years of the owner’s death. The old "stretch IRA," which let heirs spread withdrawals over their lifetime, is largely gone. Because withdrawals from a traditional account are taxable income, that ten-year window can push a working heir into higher tax brackets. And if the owner died after their own required distributions had begun, the heir must also take annual withdrawals in years one through nine, not just empty it by year ten. Planning the timing of those withdrawals matters.
Are There Exceptions?
Yes, for "eligible designated beneficiaries," who can still stretch withdrawals over life expectancy: a surviving spouse (who can also roll the account into their own IRA), a minor child of the owner (until majority, then the 10-year clock starts), a disabled or chronically ill beneficiary, and a beneficiary less than ten years younger than the owner. For a disabled beneficiary, a properly drafted special-needs trust can be the beneficiary so the inheritance does not cost them their benefits.
Is an Inherited Retirement Account Taxed?
A traditional IRA or 401k is taxed as ordinary income to the heir as they withdraw it, and unlike most inherited assets, it does not get a step-up in basis. A Roth account is generally income-tax-free to the heir, though most non-spouse heirs still must empty it within ten years (a surviving spouse can roll it into their own and keep it growing). This is why retirement accounts are often the worst assets to leave to charity-minded plans and the best to leave to a spouse or a Roth, decisions we coordinate with your financial advisor.
Should a Trust Be the Beneficiary of My IRA?
Sometimes, but it must be done carefully. Naming a trust can give you control (for a young heir, a spendthrift, or a special-needs beneficiary), but a poorly drafted trust can accelerate the tax or lose the stretch for an eligible beneficiary. It needs to be a properly structured "see-through" or conduit trust. Never let your IRA default to your estate as beneficiary: it can force a faster payout (a 5-year deadline if you die before your required distributions begin) and it drags the account through probate either way. We coordinate the beneficiary structure with the rest of your plan.
Updated on June 10, 2026. Reviewed by Kevin D. Klagge, Esq., Fla. Bar No. 99502. General information about federal and Florida law, not legal or tax advice; coordinate with your CPA and financial advisor. Retirement rules change. Do not send confidential information until we have agreed to represent you.