How Are Retirement Accounts Handled After Death in Illinois?

 Posted on March 14, 2026 in Estate Planning / Probate

Your retirement accounts represent years of hard work, and making sure they go to the right people after you're gone takes more than just having a will. How these accounts are set up right now determines what happens to them later. If you are looking to build an estate plan that protects your retirement accounts and more in 2026, our Geneva, IL estate planning lawyer can help you get that planning right before it is too late.

What Happens to a Retirement Account When the Owner Dies?

Most retirement accounts, including IRAs, 401(k)s, and 403(b)s, go directly to whoever is named as the beneficiary on the account. This happens outside of probate, which means the money doesn't have to go through the courts first. It goes straight from the financial institution to the named beneficiary.

This is why keeping your beneficiary designations current is so important. No matter what your will says, the person named on the account is the one who gets the money.

What Happens to a Retirement Account With No Beneficiary in Illinois?

If no beneficiary is named, or if the named beneficiary has already passed away, the account will likely go through probate as part of the estate. In Illinois, probate is governed by the Probate Act of 1975, 755 ILCS 5/, and can take months or longer depending on how complex the estate is.

Probate also means the retirement funds could be used to pay off debts before anything goes to family members. This is one of the most common and costly mistakes in estate planning, and it can be avoided with a little preparation.

Do Beneficiaries Pay Taxes on Inherited Retirement Accounts in Illinois?

Illinois does not have a state inheritance tax on retirement accounts, but federal income tax rules still apply. When someone inherits a traditional IRA or 401(k), they will owe income tax on the money they take out. The original owner never paid taxes on those funds, so the IRS collects when withdrawals are made.

Under the federal SECURE Act, most beneficiaries who are not a spouse must withdraw all the money from an inherited retirement account within 10 years of the owner's death. Spouses have more options. They can roll the account into their own IRA, which lets them delay withdrawals and potentially lower their tax bill.

Why Does a Beneficiary Designation Override a Will?

A beneficiary designation overrides everything else, including your will. If you named an ex-spouse on your 401(k) years ago and never changed it, that person may still get the money, no matter what your will says. Big life changes, such as marriage, divorce, having a child, or losing a loved one, should always prompt you to review your beneficiary designations.

How Can You Protect Your Retirement Accounts in Your Estate Plan?

There are simple steps you can take now to make sure your retirement accounts go to the right people. Here's what to address:

• Name both a primary beneficiary and a backup beneficiary on every retirement account you own, so there is always someone in line to receive the funds without going through probate.

• Make sure your beneficiary choices match the rest of your estate plan, including your will and any trusts you have set up.

• Consider naming a trust as the beneficiary if you have young children or a beneficiary with special needs, which can help protect the funds and control how they're used.

• Talk to an attorney about the tax impact of your choices, especially if you have both traditional and Roth accounts.

Taking these steps now can save your family a lot of time, money, and stress later.

Schedule a Free Consultation With Our DuPage County, IL Estate Planning Attorney

Whether you're settling a loved one's estate or making sure your own affairs are in order, good legal guidance makes a real difference. Attorney Walker has more than 25 years of legal experience and owns her own practice, which gives her the freedom to get personally involved with every client. She takes the time to understand each person's situation and genuinely enjoys helping people through a wide range of legal matters, including estate planning, beneficiary questions, and probate.

If you have questions about retirement accounts or any other part of estate planning, contact the Geneva, IL estate planning lawyer at DLAW, PC today. Call 331-222-7978 to schedule a free consultation.