Ask the Expert
Spring 2026
by Amy Hogue
What are the different types of retirement plans and how do retirement assets factor into legacy planning?
The most common retirement plans are traditional IRAs, Roth IRAs, 401(k)s, and SEP IRAs. Properly structured, these plans can bypass the expense of probate and transfer the assets directly to your chosen beneficiary(ies) when you pass away.
What are the most common misconceptions about legacy planning involving retirement assets?
One misconception is that a will or trust dictates who inherits retirement assets. However, to minimize probate, one must designate specific beneficiaries on each of their retirement accounts. Generally, the beneficiary designation will control, regardless of how old that designation is and regardless of what the will or trust says.
Another misconception is that the surviving spouse will automatically inherit anything that does not have a beneficiary designation. However, if there is no will, the probate court will determine your heirs using the intestacy laws where you live. For example, what if you have children from a prior marriage? That could impact what your spouse actually receives. What if your spouse predeceases you or dies simultaneously with you? Who will receive those assets if your spouse is not living? Even if you have a will, your estate would still be subject to probate if there is no beneficiary designation on your account.
How has the SECURE Act (and SECURE 2.0) as well as current estate tax exemption levels changed the landscape for IRA beneficiary planning, and what opportunities does this create?
The SECURE Act and SECURE 2.0 eliminated the “stretch IRA” for most non-spouse beneficiaries, replacing it with a ten-year, full-distribution rule which accelerates taxes for heirs. With a traditional IRA, the distribution to beneficiaries is generally treated as ordinary income. For planning, this means that many non-spouse beneficiaries must not only take required minimum distributions, regardless of their age, but also empty their inherited IRA by the end of the 10th year, potentially placing them in higher tax brackets. Although the estate tax exemption means fewer estates are subject to gross federal estate taxes, retirement assets remain heavily taxed as income in respect of a decedent.
Some planning opportunities these new rules create include converting traditional IRAs into Roth IRAs during the owner’s lifetime so that the beneficiaries will inherit tax-free assets. Additionally, many individuals will want to revisit their revocable living trusts to ensure the trust allows trustees to hold distributions inside of the trust (accumulation) rather than passing the distributions to the beneficiaries immediately. Lastly, naming charities as beneficiaries, or even creating testamentary charitable remainder trusts can help minimize the ten-year income tax acceleration.
What are the key differences between naming individual heirs versus charitable organizations as IRA beneficiaries?
Individual heirs may be subject to ordinary income tax on the distributions they receive from the retirement asset, significantly reducing the net value received. However, charities do not pay tax on IRA proceeds as they are tax-exempt organizations, making IRAs a very tax-efficient way to make charitable donations.
How does the tax treatment of IRAs for heirs differ from other inherited assets, and what are some tax-efficient ways to benefit both family members and charitable organizations?
Traditional IRAs are generally taxed as ordinary income to the beneficiaries, whereas real estate and brokerage accounts will generally receive a “step-up” in basis to the fair market value, often leading to no tax upon the sale of the asset.
One tax-efficient way to structure an estate plan would be to leave traditional IRAs to charity. The charity is a tax-exempt organization, and therefore would receive the full value of the IRA without having to pay any income tax. Assets such as real estate and brokerage accounts, which have a low basis but high fair market value, would be ideal to gift to family members at death, as there would be a step-up in basis, eliminating the capital gain consequences. Another possibility is to have the IRA paid into a testamentary charitable remainder trust, which would provide income to family members for a term of years, with the remaining balance going to charity.
How can charitable remainder trusts be used with IRA assets, and what benefits does this vehicle provide?
If you have a high-value traditional IRA, this could mean a large amount of ordinary income for your non-spouse beneficiaries for the next ten years. However, by naming your trust as the beneficiary of your IRA and having carefully crafted language which makes the trust a testamentary charitable remainder trust, the beneficiaries of the trust (such as your children or grandchildren) could potentially receive income from the IRA for life or up to 20 years, with the remainder going to a charity of your choice. When the funds from the IRA are distributed to the trust, it is a tax-exempt transfer, allowing the full amount to be reinvested and continue to grow.
Are there ways to make a charitable impact from an IRA during an individual’s lifetime?
Individuals age 70 ½ and older can make qualified charitable distributions (QCDs) from a traditional IRA. QCDs are direct transfers up to $111,000 (in 2026) to a qualified charitable organization, with no income tax on the distribution. In addition, QCDs can go toward satisfying the Required Minimum Distribution requirements.
What are the most common mistakes you see in IRA beneficiary designations, and how can they be avoided?
Common mistakes include failing to name a beneficiary, not updating your beneficiary, naming your estate or a minor as the beneficiary, naming an adult with the intention of the adult using the distribution for the benefit of a minor, or naming a trust as the beneficiary without making sure your trust is drafted appropriately. If no beneficiary is named, the IRA defaults to your estate, which means the costly expense of a probate action and subjecting the assets to claims of creditors. Additionally, failing to update beneficiaries after the death of a loved one or a divorce can lead to ex-spouses inheriting assets or your desired beneficiaries being skipped altogether (depending on the laws where you live). If a minor is named as the beneficiary of your IRA, this could lead to costly court-appointed guardianship actions for management of the funds.
All of the above can be avoided by regularly checking with your financial advisor, CPA and attorney to verify what the best beneficiary designations are for your given situation.
Amy Hogue is an attorney in Sandberg Phoenix’s Business Practice Group, where she practices in the areas of estate planning, trusts, and retirement planning for individuals and families. Amy is a graduate of the University of Florida’s Levin College of Law and a valued member of the UF Advisor Network.
The UF Foundation (federal tax ID number 59-0974739) is a Florida nonprofit organization exempted from federal income tax as a 50l(c)(3) publicly supported charity. The UF Foundation does not provide legal, tax or financial advice. When considering planning matters, seek the advice of your own legal, tax or financial professionals.
Information contained herein was accurate at the time of publishing. Figures cited in any examples are for illustrative purposes only. References to tax rates include federal taxes only and are subject to change. State law may further impact your individual results.