It sounds like a straightforward question, but the answer is anything but simple. Naming a trust as the beneficiary of your IRA can be one of the smartest moves in your estate plan — or one of the most costly mistakes — depending on your family’s circumstances and how the trust is structured.
The rules around inherited IRAs changed dramatically with the passage of the SECURE Act in 2019, and the final IRS regulations that took full effect in 2025 have added another layer of complexity. If you created your estate plan before these changes, there’s a good chance your trust no longer works the way you intended.
Here’s what Massachusetts families need to know before making this decision.
Why People Name Trusts as IRA Beneficiaries
The appeal is easy to understand. When you name an individual directly as your IRA beneficiary, they receive the funds outright. That means they can spend the entire account in a single withdrawal if they choose — or they could lose the funds to creditors, a divorce settlement, or poor financial decisions.
A trust gives you control over how those funds are distributed after you’re gone. You can specify timing, conditions, and oversight through a trustee. For families with minor children, beneficiaries with disabilities, or blended family dynamics, that level of control can be invaluable.
Common reasons to use a trust as an IRA beneficiary include protecting a young or financially immature heir from squandering the funds, ensuring a child with special needs remains eligible for government benefits like MassHealth and SSI, directing funds to children from a prior marriage rather than a current spouse, and providing creditor protection for the inherited assets.
What the SECURE Act Changed — And Why It Matters
Before 2020, a non-spouse beneficiary could “stretch” distributions from an inherited IRA over their own life expectancy. That allowed the account to continue growing tax-deferred for decades. Trusts designed during this era — often called “conduit trusts” — were built around this stretch strategy.
The SECURE Act replaced the stretch with a 10-year rule for most non-spouse beneficiaries. Now, the entire inherited IRA must be fully distributed within 10 years of the original owner’s death. And starting in 2025, the IRS is enforcing annual required minimum distributions during that 10-year window if the original owner had already begun taking RMDs.
This change has enormous implications for trusts named as IRA beneficiaries:
Conduit trusts must pass all IRA distributions directly to the beneficiary each year. Under the old rules, these distributions were modest and spread over decades. Under the 10-year rule, the same trust now forces potentially large taxable distributions to the beneficiary within a compressed timeframe — exactly the outcome many people created the trust to prevent.
Accumulation trusts can retain distributions inside the trust rather than passing them to beneficiaries. This preserves the control and creditor protection you wanted. However, trusts reach the highest federal income tax bracket — 37% — at just $15,650 of income in 2025. That means IRA distributions trapped inside a trust can be taxed far more heavily than if they were distributed to an individual beneficiary in a lower bracket.
The “See-Through” Trust Requirement
For a trust to be treated as anything other than a non-designated beneficiary — which would require the entire IRA to be distributed within just five years — it must qualify as a “see-through” trust under IRS rules. This means the trust must be valid under state law (Massachusetts follows the Uniform Trust Code under Chapter 203E), it must become irrevocable at or before the IRA owner’s death, all beneficiaries must be identifiable individuals (not charities or the estate), and the trustee must provide the required documentation to the IRA custodian by October 31 of the year following the owner’s death.
If any of these requirements are missed, the trust defaults to non-designated beneficiary status, which can accelerate distributions and trigger a significant tax bill. This is a technical area where getting it wrong has real financial consequences.
When Naming a Trust Makes Sense
Despite the complications, there are situations where naming a trust as your IRA beneficiary is still the right call:
You have a beneficiary with a disability. A special needs trust can be structured as an “applicable multi-beneficiary trust” under the SECURE Act, which allows a disabled or chronically ill beneficiary to use life-expectancy distributions rather than the 10-year rule. This is one of the most important exceptions to the general rule, and it’s critical for families who need to protect MassHealth and SSI eligibility. (Learn more about how we approach special needs planning in Massachusetts.)
You have minor children. The SECURE Act treats minor children of the IRA owner as “eligible designated beneficiaries” who can take life-expectancy distributions until they turn 21, at which point the 10-year clock begins. A trust can protect those funds during the child’s minority and provide oversight into adulthood.
You’re concerned about creditor protection or financial mismanagement. If a beneficiary is going through a divorce, has significant debt, or struggles with spending, an accumulation trust may still be worth the higher tax cost for the protection it provides.
You have a blended family. Trusts can ensure that IRA assets pass to your intended beneficiaries — such as children from a prior marriage — rather than being redirected by a surviving spouse. (We discuss this in more detail in our article on structuring inheritance for blended families.)
When Naming a Trust May Not Be Worth It
If your beneficiaries are responsible adults without special circumstances, the additional tax cost and administrative complexity of routing an IRA through a trust may outweigh the benefits. In those cases, naming individuals directly — and relying on other estate planning tools for asset protection — is often the simpler, more tax-efficient approach.
It’s also worth noting that inherited IRAs are not protected from creditors in all states. However, Massachusetts does offer some protections for retirement accounts under state law, which is another factor to weigh.
The Massachusetts Tax Angle
Massachusetts doesn’t have a separate state income tax rate for trusts — the state’s flat 5% income tax rate applies to both individuals and trusts. But the federal compressed trust tax brackets mean that large IRA distributions retained inside a trust can face effective combined rates well above 40%.
And if your total estate exceeds $2 million — Massachusetts’s relatively low estate tax threshold — the IRA itself is included in your taxable estate, regardless of who the beneficiary is. Proper planning can help minimize the combined impact of estate taxes and income taxes on your IRA.
What You Should Do Right Now
If you named a trust as your IRA beneficiary before the SECURE Act, your trust may no longer function as intended. The old “stretch” strategy that your trust was built around simply doesn’t exist anymore for most beneficiaries.
Here’s what we recommend:
Review your beneficiary designations. Make sure they align with your current estate planning documents and family situation.
Have your trust reviewed by an attorney who understands the current IRS rules. The interaction between trust law, tax law, and retirement account rules is one of the most technical areas in estate planning. Generic documents are not sufficient.
Model the tax impact. Before deciding whether to name a trust or individual as your IRA beneficiary, run the numbers. The right answer depends on your beneficiaries’ tax brackets, the size of the IRA, and your overall estate plan.
Let’s Make Sure Your IRA Goes Where You Want It — And Keeps as Much Value as Possible
At The Law Offices of Kimberly Butler Rainen, we work with families across Massachusetts to coordinate retirement account planning with their broader estate plans. The rules have changed, and your plan needs to keep pace.
Contact us to schedule a consultation.