It is not a good idea to name your estate as the primary beneficiary of your self-directed IRA or to have your estate become the beneficiary of the self-directed IRA by default if you don’t complete a beneficiary election form.
Make sure to periodically review your self-directed IRA beneficiary forms to ensure they are up-to-date. Reason being, if the estate is the primary beneficiary of the self-directed IRA and you die before your required beginning date (April 1 of the year after the year you turn 73), the estate will be required to fully distribute the IRA in 5 (five) years after your death. This is 5 years sooner than the 10-year period that generally applies to a non-spouse beneficiary (e.g., your son or daughter). Therefore, from a tax perspective, payment to the self-directed IRA owner’s estate generally is the least desirable option and often requires the self-directed IRA owner’s family to incur additional expense in estate processing procedures to collect the self-directed IRA proceeds. Also, the deceased self-directed IRA owner’s financial intention was probably not to leave the IRA to his estate.
