IRA & Retirement Account Trust Planning

How did the SECURE Act change inherited IRA rules?

The SECURE Act eliminated the "stretch IRA" for most beneficiaries. Now, most beneficiaries must withdraw all funds within 10 years of the account owner's death, potentially creating massive tax bills. Eligible Designated Beneficiaries (surviving spouses, minor children, disabled/chronically ill individuals, and beneficiaries within 10 years of age) can still stretch distributions.

What is the difference between conduit and accumulation IRA trusts?

Conduit trusts automatically distribute all IRA distributions directly to beneficiaries immediately, providing no asset protection but optimal tax treatment. Accumulation trusts allow trustees to hold distributions in trust, providing creditor protection, divorce protection, and control, but distributions held in trust are taxed at compressed trust tax rates (37% bracket starts at $15,200 in 2024).

What is a see-through trust for my IRA?

A see-through trust (qualifying trust) is an IRA beneficiary trust meeting specific IRS requirements, allowing the trust to be "looked through" to individual trust beneficiaries for distribution purposes. Naming a non-qualifying trust can force immediate taxation of the entire IRA within 5 years, making proper drafting critical for preserving tax-deferred growth.

Do I need an IRA trust or can I just name beneficiaries directly?

Direct beneficiary designation works for financially responsible adult children with stable marriages and no creditor issues. However, an IRA trust is essential if beneficiaries are minors, have disabilities, are in high-risk professions, have addiction or spending problems, are in troubled marriages, or when you want to ensure funds benefit grandchildren after children pass away.

Can I leave my IRA to my living trust?

Generally no - naming your revocable living trust as IRA beneficiary usually requires the entire IRA to be distributed and taxed within 5-10 years, losing all future tax-deferred growth. However, a properly drafted standalone IRA trust or specific see-through trust provisions in your living trust can preserve tax-deferred treatment while providing control and protection.

What are the tax implications of inherited IRAs?

Inherited traditional IRA distributions are taxed as ordinary income at beneficiaries' marginal tax rate. The SECURE Act's 10-year rule forces beneficiaries to withdraw all funds within 10 years, potentially creating large tax bills during peak earning years. Roth IRA inheritances are tax-free but still subject to the 10-year rule. Strategic planning can spread distributions to minimize taxes.

What happens to my IRA trust if I remarry?

Your IRA trust beneficiary designations remain in effect unless you update them. If you remarry and want your new spouse as beneficiary, you must submit new beneficiary designation forms to your IRA custodian. In community property states like California, your new spouse may have rights to IRA assets accumulated during marriage, making professional guidance essential for second marriages.

How much does IRA trust planning cost?

Standalone IRA trust planning typically costs $2,500-$5,000 for basic conduit trusts. More complex accumulation trusts with multiple beneficiaries, special needs provisions, or charitable components range from $5,000-$10,000. The cost is minimal compared to potential tax savings—a $1 million IRA could save $100,000-$300,000+ in taxes with proper planning under the SECURE Act.