In the post-SECURE Act landscape, naming a trust as your IRA beneficiary requires choosing between conduit and accumulation provisions to protect heirs.
Leaving retirement assets to loved ones through a trust ensures funds are managed responsibly, protected from creditors, and distributed according to your family values. However, the elimination of the stretch IRA under SECURE 1.0 requires careful trust drafting.
1. Conduit Trusts vs. Accumulation Trusts
Under a conduit trust, any distributions received from the IRA must be passed immediately out to the individual beneficiary. Under an accumulation trust, the trustee has discretion to retain IRA distributions inside the trust for asset protection, spendthrift safeguards, or special needs beneficiaries.
2. Evaluating Trust Tax Bracket Acceleration
Income accumulated inside a trust reaches the highest federal income tax bracket at very low income thresholds ($15,200 in 2026). Wealth planners must weigh the protective benefits of accumulation trusts against the potential tax drag of accelerated trust tax rates.
Disclaimer: Work with an experienced estate planning attorney licensed in your jurisdiction.