Estate as Beneficiary of Traditional IRA or Retirement Plan
Generally, following your death, your nonretirement assets will pass according to your will or trust or beneficiary designations (e.g., life insurance). If you do not have a will or trust or there is a gap in your beneficiary designations, the laws of your state (or the state where you own real property) will generally determine your heirs.
With IRAs and employer-sponsored retirement plans, when you die, the remaining funds generally pass directly to the beneficiary (or beneficiaries) you have designated. Spouses, children and grandchildren, trusts, and charities are common beneficiary choices. However, if you have a gap in your beneficiary designations, your estate may become the "default" beneficiary of your IRA and/or retirement plan benefits. This could occur, for example, if all of your designated beneficiaries die before you, and then you die before naming a new beneficiary.