My husband and I saved enough for retirement — he has $100,000 in his IRA and I am the sole beneficiary. Should we list our kids instead?

Take this hypothetical situation as an example: Having diligently saved throughout their working years, couple Linda and Mark are now living a stress-free retiree lifestyle.

In fact, Linda is in such a strong financial position that, even on her own, she could comfortably cover what they would have needed together. Mark, meanwhile, has about $100,000 in his traditional IRA with Linda currently listed as the sole beneficiary.

So, if Linda doesn't actually need that IRA to maintain their lifestyle, does it make more sense to name their children as beneficiaries now?

The idea is to get rid of pesky legal barriers so the next generation can get access to those assets sooner. While that motive makes sense, the benefits may not be worth the hassle.​

Here's why.

The basics on IRA beneficiaries

Simply put, a beneficiary is a person or persons that you name on an account to inherit funds after you die. The basic idea is simple enough to grasp, but it gets a bit complicated when you factor in tax policies and laws in different states.

It's true that changing the beneficiary status on Mark's IRA to his kids would streamline the delivery process given that beneficiaries bypass probate (2). So, that does make this move "simpler" for estate planning.

On the downside, child beneficiaries don't have the same flexibility with inherited assets as spouses.​

According to the IRS's policies, if Mark died before the required minimum distribution (RMD) date, Linda has several options. She could keep the IRA, delay distributions until Mark would have turned 72, take distributions based on her life expectancy, or even use a rollover (3).

Designated non-spousal beneficiaries don't have as many options. In fact, there's a restrictive "10-year rule" where the children have to withdraw funds within a decade. That limits long-term growth potential and could put them in a higher marginal tax bracket if they take large distributions (4) and already have a certain level of income.

If this couple kept Linda as the beneficiary, they'd preserve flexibility and tax deferral, even if she doesn't strictly "need" the money.​

And who's to say Linda or Mark won't need this $100,000? Just one health scare could be extremely costly.

For context, Medicaid Planning Services estimates the average cost for a shared room in a nursing home is $119,340 (5) per year and SeniorLiving.org estimates the median annual cost for assisted living is now $75,756 (6) per year.

Other life circumstances, that may be difficult to predict, might also derail Linda's current path — such as needing to adopt and care for grandchildren.

Are there "better" ways to pass down an IRA

It's understandable why Linda and Mark feel changing the beneficiary status is a good move, but there are ways they could help their children and preserve more of their wealth.

For instance, why not send some money from the IRA fund each year to their kids as a gift? The IRS allows individuals to send tax-free gifts up to the annual exclusion amount for each donee, currently $19,000 (7).

True, Mark has to pay regular ordinary income taxes on withdrawals from his traditional IRA, but the children wouldn't have to worry about the taxes that come with withdrawals as beneficiaries.