The only time your Will would control who gets your IRA is if your estate is the beneficiary. Generally, it’s not a good idea to name your estate as the beneficiary of your IRA.
Even though you made sure to prepare your Last Will and Testament, it is not always the final word on the distribution of your assets. Take for example your IRA. An IRA will be directed by the beneficiary form – of which you may have completed without thinking through the potential outcome.
Warning: do not designate your “estate” as the beneficiary of your IRA unless you have thoroughly considered all the consequences. This severely limits the distribution (and taxation) options available to your heirs. This matter was explored in a recent article in The Slott Report titled “IRAs and Wills Don’t Mix.”
While your “estate” can be the beneficiary of your IRA and your Will thereafter determines the distribution of the retirement funds, this might not be best idea tax-wise. IRAs are very specific and peculiar assets with very specific inheritance rules. If your “estate” is the beneficiary of your IRA, then very “unfavorable” withdrawal rules apply. Instead of the IRA being withdrawn over the life expectancy of the beneficiary (typically younger than the plan owner), the funds must be withdrawn within five years or perhaps over your remaining life expectancy. Yes, this can get rather complicated.
Make sure you consult with competent legal counsel when coordinating the distributions from your Last Will and from your IRA.
Reference: The Slott Report (July 29, 2013) “IRAs and Wills Don’t Mix”