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How should minor children be listed as IRA beneficiaries?
I would like to bring up some slightly different points than the ones raised in the excellent answers from JoeTaxpayer and littleadv.  The estate can be the beneficiary of an IRA -- indeed, as has been pointed out, this is the default beneficiary if the owner does not specify a beneficiary -- but a testamentary trust cannot be the designated  beneficiary of an IRA. A testamentary trust that meets the requirements laid out on page 36 of Publication 590 is essentially a pass-through  entity that takes distributions from the IRA and passes them on to the beneficiaries.   For the case being considered here of minor beneficiaries, the distributions from the  IRA that pass through  the trust must be sent to the legal guardians (or other custodians) of the minors' UTMA accounts, and said guardians must invest these sums for the benefit of the minors and hand the monies over when the minors reach adulthood. Minors are not responsible for their support, and so these monies cannot be used by the legal guardian for oaying the minors' living expenses except as provided for in the UTMA regulations. When the minors become adults, they get all the accumulated value on their UTMA accounts, and can start taking  the RMDs personally after that, and blowing them on motorcycles if they wish.  Thus, the advantage of the testamentary trust is essentially that it lets the trustee of the trust to decide how much money (over and above the RMD) gets distributed each year.  The minors and soon-to-be young adults cannot take the entire IRA in a lump sum etc but must abide by the testamentary trustee's ideas of whether extra money (over and above the RMD) should be taken out  in any given year. How much discretion is allowed to the trustee is also something to be thought through carefully. But at least the RMD must be taken from the IRA and distributed to the minors' UTMA accounts (or to the persons as they reach adulthood) each year.  Regardless of whether the Traditional IRA goes to beneficiaries  directly or through a testamentary trust, its value (as of the date of death) is still included in the estate, and estate tax  might be due. However, beneficiaries can deduct the portion of estate tax paid by the estate from the income tax that they have to pay on the IRA withdrawals. Estate planning is very tricky business, and even lawyers very competent in estate and trust issues fall far short in their understanding of tax law, especially income tax law.