Naming a Trust as an IRA Beneficiary: What You Need to Know

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Trusts are widely used in estate planning to provide control, protection, and flexibility over how assets are managed and distributed. They help ensure assets are directed according to your wishes, protect beneficiaries who may not be equipped to manage an inheritance on their own, and offer privacy and efficiency in settling your estate.

While it is more common to name individuals as IRA beneficiaries, there are specific cases where naming a trust as an IRA beneficiary may be the right choice—such as when planning for minors, beneficiaries with special needs, or coordinating more complex family or tax strategies.

However, the rules governing trusts as IRA beneficiaries are intricate and have become even more so following the SECURE Act (2019) and SECURE 2.0 (2022). If you're considering naming a trust as your IRA beneficiary, understanding the IRS required minimum distribution (RMD) rules and their tax impact is essential to avoiding unintended consequences.

Why Consider Naming a Trust as an IRA Beneficiary?

Naming a trust as the beneficiary of your IRA can give you more control over how and when retirement assets are distributed after death. For example:

  • Distribute assets gradually to a young or financially inexperienced heir

  • Protect a beneficiary who relies on means-tested public benefits

  • Provide long-term oversight for a loved one with special needs

  • Centralize planning by updating one trust document instead of multiple beneficiary forms

However, due to post-SECURE Act complexity, careful structuring is critical to avoid accelerated taxes and lost deferral opportunities. 

Understanding Beneficiary Categories Under the SECURE Act

The SECURE Act categorizes beneficiaries into three main types, each with distinct tax treatment:

1. Eligible Designated Beneficiaries (EDBs)

These individuals can stretch IRA distributions over their life expectancy:

  • Surviving spouse

  • Minor child of the account owner (until age 21, then 10-year rule applies)

  • Disabled or chronically ill individual

  • Individuals not more than 10 years younger than the account owner

2. Non-Eligible Designated Beneficiaries (Non-EDBs)

These include most adult children and grandchildren. They must withdraw the entire IRA balance within 10 years, accelerating taxable income.

3. Non-Designated Beneficiaries

Includes entities like estates or certain trusts that do not qualify as see-through. These are subject to stricter RMD schedules:

  • If the owner died before their Required Beginning Date (RBD): Account must be emptied within 5 years

  • If the owner died on or after their RBD: Distributions follow the owner’s remaining life expectancy

RBD Note: The Required Beginning Date is April 1 of the year after turning age 73 (or 75 if turning 74 after December 31, 2032, under SECURE 2.0).

Examples

  • A 15-year-old minor child (EDB) can stretch distributions to age 21, then must fully distribute by age 31

  • A 45-year-old adult child (non-EDB) must withdraw all funds within 10 years

  • A non-see-through trust inheriting a $500,000 IRA must follow the 5-year rule if the owner died before RBD—leading to large annual distributions taxed at 37% federal if retained

Vaultis Private Wealth – helping clients structure trusts as IRA beneficiaries under SECURE Act rules

 Trusts as IRA Beneficiaries: A Complex Framework

Trusts are subject to unique IRS rules depending on whether they qualify as see-through trusts and the status of the underlying beneficiaries.

Non-See-Through Trusts (Non-Designated Beneficiaries)

These trusts fail to meet IRS "see-through" requirements—often due to:

  • Having non-individual beneficiaries

  • Failing to provide documentation to the IRA custodian

  • Ambiguous or noncompliant language in the trust document

Distribution rules:

  • Owner died before RBD → 5-year rule

  • Owner died on or after RBD → Distributions follow owner’s life expectancy

Example: A non-see-through trust inherits a $500,000 IRA in 2025. If the owner died before RBD, the account must be distributed by 2030—about $100,000 per year. If retained, income taxed at trust rates (37% federal starting at $15,200 in 2025).

See-Through Trusts (Designated Beneficiaries)

A see-through trust meets IRS criteria:

  • Has identifiable individual beneficiaries

  • Is valid under state law

  • Provides timely documentation to the IRA custodian

This allows the IRS to look through to the underlying beneficiaries and apply EDB or non-EDB rules.

Scenarios:

  • All EDBs: Life expectancy stretch allowed

  • Any Non-EDB: 10-year rule applies

  • Owner died after RBD: Years 1–9 require annual RMDs based on oldest beneficiary’s life expectancy

Example: A see-through trust names a 65-year-old spouse (EDB) and a 30-year-old adult child (non-EDB). The presence of a non-EDB triggers the 10-year rule—$1 million must be distributed by 2034, likely $100,000 annually.

Separate Accounting: A Key Opportunity Under Final Regulations (2024)

New IRS guidance (Final RMD Regulations, July 2024) allows separate accounting for subtrusts if:

  • The trust document mandates division immediately after death

  • Subtrusts receive pre-specified IRA shares (not discretionary)

Each subtrust can then follow the distribution schedule of its own beneficiary:

  • EDB Subtrusts: Stretch allowed

  • Non-EDB Subtrusts: 10-year rule applies

Example: A $1 million IRA is split between a spouse (EDB) and adult child (non-EDB) in 2025.

  • Spouse’s subtrust: Life expectancy stretch (approx. $21,000/year initially)

  • Child’s subtrust: 10-year rule ($50,000/year if evenly split)

  • Each pays tax based on their own rate—potentially reducing trust-level taxation.

Strategic Tax Planning for IRA Trust Beneficiaries

If you're considering naming a trust as your IRA beneficiary, keep these planning tips in mind:

  • Use separate accounting: Mandate subtrusts in your document and assign specific IRA shares

  • Ensure see-through compliance: Only use identifiable individual beneficiaries and submit timely documentation

  • Match structure to intent:

    • Use conduit trusts for simplicity and direct distributions to EDBs

    • Use accumulation trusts for control, but account for high trust tax rates

  • Consult a qualified attorney to ensure compliance with SECURE Act and IRS regulations

  • Review regularly: Update your trust after life events or regulatory changes (e.g., SECURE 2.0 RMD age shifts)

Take Action: Plan Your Trust with Precision

The SECURE Act and the 2024 IRS regulations introduced new complexities—but also new planning opportunities. If you’ve named, or are considering naming, a trust as your IRA beneficiary, now is the time to review your plan.

At Vaultis Private Wealth, we work closely with clients to ensure their estate and retirement assets are coordinated thoughtfully and tax-efficiently. From trust structure to beneficiary designation, we help you take proactive steps to protect your legacy and minimize unintended tax consequences.

Frequently Asked Questions

Can I name a trust as the beneficiary of my IRA?

Yes. A trust can be named as an IRA beneficiary, but it must meet certain IRS criteria to preserve favorable tax treatment. These are known as the “see-through” trust rules.

What is a see-through trust?

A see-through trust is one where all beneficiaries are identifiable individuals, allowing the IRA to “look through” the trust and apply distribution rules based on the underlying beneficiaries’ life expectancies or the 10-year rule under the SECURE Act.

Why would someone name a trust instead of an individual?

Trusts are often used to control how and when IRA assets are distributed — especially useful for minors, spendthrift heirs, or complex family situations. They also provide an additional layer of asset protection and control after death.

How did the SECURE Act change IRA planning with trusts?

The SECURE Act eliminated the stretch IRA for most non-spouse beneficiaries, including trusts. Most trust beneficiaries must now fully distribute inherited IRA assets within 10 years, which can accelerate tax consequences.

Are there risks to naming a trust as the IRA beneficiary?

Yes. If the trust doesn’t meet IRS requirements or isn’t drafted carefully, it could trigger immediate taxation or force faster distributions. Coordination between your attorney and financial advisor is critical to avoid unintended outcomes.

Disclaimer: This article is for informational purposes only and does not constitute legal, tax, or investment advice. Individual circumstances vary, and tax laws are subject to change. Please consult with a qualified financial, tax, or legal advisor before making decisions regarding your IRA or beneficiary planning.