Coordinated Counsel
Trust on the Retirement Accounts as Beneficiaries
Transcript
BARRY: Two more things, because I know you’ve got to roll. Using trusts on the retirement accounts as beneficiaries. I’m sure you see it a lot.
CHAD: Yeah.
BARRY: There’s that rule you mentioned about the oldest beneficiary’s life expectancy applying to the youngest. That’s one issue. There’s something called accumulation trusts and see-through trusts to qualify for the tax rules. There’s issues when charities are named. There are actually some interesting complications with charities being named and whether or not you can timely get them the money.
There are just a lot of things you have to think about when you do this type of planning. But Trusts are used for retirement accounts I think primarily because of asset protection. In recent years, the asset protection benefits of inherited IRAs have been basically extinguished. There’s no more protection. They’re not exempt anymore when they’re inherited.
So to protect them, you put them into a trust that becomes irrevocable upon death. That can provide a layer of protection, but you have to play by the rules, and most of the rules are tax rules.
CHAD: That’s news to me, so I found value in our talk today.
BARRY: Hey, you learn something. It’s a win. All worth it now.
The last thing I want to say is that, as Chad mentioned earlier — not the trim but the triumvirate, which I refer to as the trifecta — But we’re talking about the same thing. You’re really well served if you’re working with me, Chad, and a CPA on the same team at the same time, all communicating with each other about you, your family, and your business, making sure you’re moving forward in the right direction.
Think of it as a sounding board or a board of directors, whatever you want to call it. It’s just malpractice for each of us not to be communicating with the others. It’s impossible for us to do a good job for you without working together.
I think you would agree it’s a team sport.
CHAD: You can tell this by looking at our designations and credentials. As a financial planner, I like understanding the legal side of things and the tax implications. You’re a lawyer, but you also have an LLM in tax. And we work with CPAs who are well-versed in everything. Because we need to be able to speak each other’s language and understand broader planning concepts. And then have each professional focus on what they do best, but everyone should understand the broad picture.
BARRY: Yeah. And in my experience — and you can tell me if it’s different for you — if I bring you in, I’m kind of quarterbacking with the people I bring in to make sure everything is moving forward. And if you bring me in, you’re kind of quarterbacking to make sure we’re working together. It’s just kind of how it works.
And we make sure we’re working with the right people so that you have the best planning possible. There will always be holes and potential problems, but you’re much better served when you have the right professionals on your team. Thank you very much for doing this.
CHAD: Thank you. And thank everyone for listening.
BARRY: Yes, thank you for listening. If you have any questions or if we can help you, please give us a call. We’d be glad to help. Have a great rest of the day.
CHAD: You too. Take care, Barry.
BARRY: See you later.
Should You Name a Trust as the Beneficiary of Your Retirement Accounts?
By: Barry E. Haimo, Esq.
April 2, 2026
Retirement accounts are often among the most valuable assets a person owns. IRAs and 401(k)s can represent decades of savings and, in many cases, make up a large portion of an individual’s net worth. Because of this, how these accounts pass to the next generation deserves careful planning.
One strategy that sometimes comes up in estate planning discussions is naming a trust as the beneficiary of a retirement account. While this approach can provide certain benefits, it also comes with complex tax and legal rules that need to be carefully considered.
Why Some People Use Trusts for Retirement Accounts
Traditionally, many people name individuals (such as a spouse or children) as the direct beneficiaries of their retirement accounts. This approach is simple and allows the account to transfer quickly after death.
However, there are situations where naming a trust may make more sense.
One common reason is asset protection. When an individual inherits a retirement account directly, the inherited account may be vulnerable to creditors, lawsuits, or divorce in some circumstances. By directing the account into a properly structured trust, it may be possible to add a layer of protection and control over how the funds are distributed.
Trusts can also be helpful when the intended beneficiaries are minors, individuals with special needs, or family members who may need guidance in managing a large inheritance.
The Tax Rules Are Complicated
While the idea of using a trust may sound straightforward, retirement accounts are governed by strict tax rules that make planning more complicated.
For a trust to receive retirement account assets in a tax-efficient manner, it often needs to qualify as a “see-through trust.” This means the trust must meet specific requirements so that the IRS can effectively look through the trust and identify the individual beneficiaries for tax purposes.
If these requirements are not met, the retirement account could be forced into faster distribution schedules, potentially accelerating income taxes for beneficiaries.
There are also different types of trusts (such as conduit trusts and accumulation trusts) that affect how retirement distributions are handled. Each structure comes with its own advantages, limitations, and tax considerations.
Charitable Beneficiaries Can Create Additional Issues
Another factor that sometimes complicates retirement account planning is the inclusion of charitable beneficiaries. While charitable giving can be an important part of many estate plans, combining charities and individuals within the same retirement account structure can create timing and tax challenges.
In certain cases, charitable beneficiaries must receive their share of the account within specific timeframes to preserve favorable tax treatment for the remaining beneficiaries.
These rules can make the structure of the plan especially important.
Retirement Planning Requires a Team Approach
Because retirement accounts involve both estate law and tax law, planning in this area often benefits from collaboration among multiple professionals.
Financial advisors, estate planning attorneys, and CPAs each bring a different perspective to the process. When these professionals work together, they can help ensure that retirement accounts are coordinated with the broader estate plan and tax strategy.
Retirement accounts are not just investment vehicles. They are also estate planning assets with unique rules. Taking the time to structure them properly can help protect beneficiaries, reduce tax complications, and ensure that years of savings are transferred as efficiently as possible.
We can help. And if you’re interested in getting all of your advisors on the same page, get in touch with Kinnect Financial.
