Big Mistake: A 68-Year-Old Will Leave the Beneficiary Line Blank on a $700,000 IRA, and His Kids Will Get Five Years, Not Ten, and a Probate Judge in the Middle
Skipping one line on a custodian form can hand a probate judge control over a seven-figure IRA and quietly cut the window your kids have to manage the tax bill in half. Here is what goes wrong and how fast…
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A 68-year-old retiree with $700,000 in a traditional IRA saved for decades and never raided the account early. What he skipped is a single line on a custodian form: the beneficiary designation. Maybe he never filled it out. Maybe he named his late wife years ago and never updated it. Either way, the outcome is the same.
This mistake trips up people who assume a will covers everything. An IRA passes by its beneficiary form, which overrides the will entirely.
Suze Orman answered a version of this question in April 2026 from a listener whose widowed mother needed to name beneficiaries on her new IRA. Orman explained that adult children named on the form become non-eligible designated beneficiaries, and told them simply: “You will have 10 years to wipe it clean.” That 10-year window is exactly what this retiree’s kids stand to lose.
How a Blank Line Cuts the Payout Window in Half
When no beneficiary is named, most IRA custodial agreements default the account to the owner’s estate. The IRS treats an estate as having no designated beneficiary, stripping the kids of the 10-year rule they would get if named directly.
Under SECURE 2.0, someone born in 1958 reaches RMD age at 73, with a required beginning date of April 1 of the following year. If he dies before that date with his estate as beneficiary, the five-year rule applies: every dollar must come out by December 31 of the fifth year after death.
Compress $700,000 of pre-tax money into five tax years instead of ten, and each child’s share stacks on top of their own salary over fewer years. For kids in their peak earning years, that stacking pushes a larger slice into the 24% or 32% brackets instead of the 22% bracket. The account also loses five years of tax-deferred compounding.
Probate Burns Time the Kids Can’t Get Back
Sending the IRA to the estate drags it into probate. A court names an executor, the account enters the public record, and estate creditors can make claims against money that would otherwise pass straight to the kids. The five-year clock starts at death regardless of when the judge signs off.
Fix the Form First, Then Shrink the Tax Bill
Path One: Name Beneficiaries This Week
This is the answer for nearly everyone in this position and costs nothing. Relying on the will instead is the worse path in every scenario.
- Log in to the custodian’s site and open the beneficiary screen. Most firms let you update it online in minutes, with no notary required.
- Name each child as a primary beneficiary with explicit percentages that add up to the whole account, so the custodian never has to interpret intent.
- Add “per stirpes” if offered, so a child who dies first passes their share to their own kids instead of it defaulting back to the estate.
- Save the confirmation and recheck after every life event, including a death, divorce, remarriage, or a move to a new custodian, since forms do not always transfer cleanly.
Path Two: Convert Some of the IRA Before RMDs Begin
Between 68 and RMD age, he can convert chunks of the IRA to a Roth. He pays tax now at his own rate, and the kids later inherit money they can withdraw tax-free, still within 10 years. Orman put it this way: “Roth, Roth, Roth. And if everything is in a Roth when you die, they’re fine.”
The tradeoff is upfront tax. Conversions make sense when his bracket is at or below the brackets his kids are likely to be in. They also raise his reported income, which can increase Medicare premiums.
Two Moves That Decide the Outcome
First, read the beneficiary screen today. A blank line, a deceased spouse, or the words “my estate” all produce the same result: five years instead of ten and a probate judge in the middle.
Second, avoid the assumption that a will or living trust handles the IRA. If any child is a minor, disabled, or facing creditor or divorce issues, naming a trust may be worth it. Trust wording determines whether the kids keep the 10-year rule or fall back to something worse. (A outdated beneficiary form or an untitled account is often behind estate problems, which is why we put the full cleanup checklist in a free estate guide here.)
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Jake has been been working in financial media for almost 15 years. He focuses on all things personal finance for 24/7 Wall St. with high hopes to educate and entertain. Most recently, Jake spent 12 years working various roles at The Motley Fool. He started copy editing fool.com content, worked on premium and marketing campaigns, and helped launch The Ascent, a personal finance brand.
His work has been featured on platforms like MSN, Yahoo Finance, USA Today, and more. He's written about credit cards, social security, ETFs, savings accounts, and just about anything else you can imagine when thinking about money. Jake love to cook, play golf, and tell people he's never had a cavity. (It's true!)
