In 2019, Sandra Williams discovered her late ex-husband's estate was fighting over his $450,000 IRA. The problem: he had divorced Sandra four years earlier, remarried, and updated his will — but never updated the IRA beneficiary designation. Under federal law, the IRA passed to Sandra despite the divorce, the new wife, and a will that said otherwise. The new wife spent two years and $30,000 in legal fees and lost.
This is not a rare story. Attorneys who handle estate litigation see it constantly. IRA beneficiary designations are the single most dangerous area of estate planning — because they override your will, they control enormous sums, and most people set them up once and forget about them for decades.
This guide covers everything you need to know about IRA beneficiary planning in 2026, including the critical changes under SECURE Act 2.0 that affect every IRA owner.
This cannot be overstated: your IRA passes directly to your named beneficiary, regardless of what your will says.
If your will leaves "everything to my children equally" but your IRA still names your college girlfriend from 1998 as beneficiary, your college girlfriend gets the IRA. Your children get nothing from that account.
This isn't a legal loophole — it's how the law is designed. Congress created beneficiary designations specifically to allow assets to pass outside of probate, quickly and privately. The trade-off: they're completely independent from your will and must be maintained separately.
Each of these requires a separate beneficiary review. Updating your will has zero effect on these accounts.
The SECURE Act (2019) and SECURE 2.0 Act (2022, effective 2025) fundamentally changed how inherited IRAs work. If your IRA planning was done before 2020, it needs review.
Before 2020, non-spouse beneficiaries could "stretch" inherited IRA distributions over their own life expectancy. A 30-year-old inheriting a $1M IRA could take small distributions for 50+ years, keeping most of the money growing tax-deferred for decades. This was the "stretch IRA" strategy.
Under SECURE Act 2.0, most non-spouse beneficiaries must distribute the entire inherited IRA within 10 years of the original owner's death. This eliminates the stretch strategy for most people.
The impact: a beneficiary inheriting a $1M IRA must withdraw all of it within 10 years, paying income tax on distributions. Depending on their tax bracket and the distribution timing, this could mean $300,000–$400,000 in federal income tax that could have been deferred for decades under the old rules.
In 2025, the IRS finalized regulations clarifying that if the original IRA owner had already begun Required Minimum Distributions (RMDs) at death, non-spouse beneficiaries must take annual RMDs during the 10-year period AND fully distribute by year 10. This "and" requirement (not "or") was controversial and caught many beneficiaries by surprise.
The 10-year rule doesn't apply to "eligible designated beneficiaries" (EDBs), who retain stretch IRA treatment:
Let's see how a common mistake unfolds with real numbers.
The Setup: Michael, 65, has a $1.2M traditional IRA. He's been divorced for eight years and remarried four years ago. He forgot to update his IRA beneficiary after his divorce. His current wife, Patricia, is named in his will to receive everything. His IRA still names his ex-wife, Diane.
The Outcome: Michael dies at 68. His IRA automatically transfers to Diane. Patricia inherits his other assets (home, bank accounts) through his will, but Diane receives the $1.2M IRA. Under the 10-year rule, Diane must distribute the IRA within 10 years — meaning she takes $1.2M in taxable income, likely paying $300,000–$480,000 in federal income tax depending on her bracket.
The Fix: 30 minutes on the IRA custodian's website after the divorce to update the beneficiary designation.
Every IRA should have both primary AND contingent beneficiaries designated.
The first in line to receive the IRA. If your primary beneficiary survives you, they receive the account. If multiple primary beneficiaries, the IRA is split according to the percentages you specify (e.g., "to my three children equally, 33.33% each").
Receives the IRA if your primary beneficiary predeceases you. Without a contingent beneficiary, if your primary beneficiary dies before you, the IRA typically falls to your estate — triggering probate and potentially unfavorable tax treatment.
When naming multiple beneficiaries, you can specify:
For complex family situations — minor children, spouses in blended families, beneficiaries with special needs — naming a trust as IRA beneficiary can make sense. But it requires careful drafting.
To preserve individual beneficiary treatment (and avoid accelerated distributions), the trust must qualify as a "see-through" or "look-through" trust:
Warning: IRA trusts are complex. A poorly drafted trust can accelerate all distributions into a single tax year. Never create an IRA trust without an estate planning attorney who specializes in this area.
The type of IRA significantly affects beneficiary planning strategy:
All distributions are taxable income to the beneficiary. Under the 10-year rule, the beneficiary controls when within those 10 years to take distributions — ideally in lower-income years. A beneficiary who inherits a Traditional IRA should work with a tax advisor to optimize the distribution schedule.
Distributions are generally tax-free to beneficiaries (assuming the 5-year holding period was met). The 10-year rule still applies, but since distributions are tax-free, the beneficiary often has more flexibility. A Roth IRA is often the best asset to leave to younger beneficiaries in higher tax brackets who will appreciate the tax-free nature of distributions.
Trust & Will includes customized guidance on beneficiary planning, compatible with both IRAs and other estate assets. Protect your retirement savings with a complete plan.
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