The beneficiary designation trumps the language in the will. Even if it was your dad's intent that you receive this money as individuals, since the estate was listed as the beneficiary on the actual IRA, the IRA became a probate asset. Instead of being able to take the money incrementally over your lifetimes, the payout will be immediate, causing unwanted tax consequences.
Your dad is not alone in making this error. Everyone reading this needs to check their IRA beneficiaries. I've seen money go to ex-spouses, parents instead of spouses, siblings instead of children and every other permutation that's possible. People tend to fill out these forms when they open an account or start employment and never revisit them.
The IRA beneficiary designation will control what happens to the IRA funds. Once the IRA fund are paid to the estate, the designations in the Will then will determine what happens to the funds.
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