If you name your estate as the beneficiary of your IRA, then your will controls who gets it. The biggest problem with having your estate as your IRA beneficiary is that the death distribution options will be severely limited.
Under IRS rules, your estate is not considered a “designated beneficiary” which means it has no life expectancy and can’t take advantage of the “stretch IRA” concept. So, if you die before your required beginning date (April 1 of the year after you turn age 70 ½), the IRA will have to pay out all funds to the estate within five years. If you die after your required beginning date, your IRA will have to make distributions to the estate over your remaining single life expectancy. What this all means for the beneficiaries who eventually get your IRA funds through your estate is that they’ll have to take the funds sooner, and thus likely pay more taxes than if you had named than as the direct beneficiary of your IRA.
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