Naming a Trust as Beneficiary of an IRA: See-Through Trusts and the Payout Rules

Can a trust be the beneficiary of an IRA?

Yes. A trust is not an individual, so it is not itself a designated beneficiary. But if the trust meets four requirements, certain of its beneficiaries “are treated as having been designated as beneficiaries” of the account, and they set the payout period (Treas. Reg. § 1.401(a)(9)-4(f)(1)). The regulation calls this a see-through trust. A trust that fails the requirements leaves the account with no designated beneficiary.

These rules are in the final regulations under IRC § 401(a)(9) published in July 2024 (T.D. 10001), which apply for determining required distributions for calendar years beginning on or after January 1, 2025 (Treas. Reg. § 1.401(a)(9)-1(d)). They are written for employer plans and apply to IRAs through Treas. Reg. § 1.408-8(a), which substitutes the IRA owner for the employee and the IRA trustee or custodian for the plan administrator. The trust becomes the beneficiary only if it is named on the account’s beneficiary form; see the beneficiary-designation audit.

The four see-through requirements

The requirements must be met during any period in which distributions are being figured by reference to the trust’s beneficiaries (§ 1.401(a)(9)-4(f)(2)):

• Valid. The trust is a valid trust under state law, or would be but for the fact that there is no corpus.
• Irrevocable. The trust is irrevocable or will, by its terms, become irrevocable upon the owner’s death.
• Identifiable beneficiaries. The beneficiaries who have an interest in the account through the trust are identifiable from the trust instrument.
• Documentation. The documentation requirements of § 1.401(a)(9)-4(h) are satisfied.

Identifiable means it is possible to identify each person eligible to receive a portion of the account through the trust. Beneficiaries need not be named if they can be identified, as with a gift to the owner’s children (§ 1.401(a)(9)-4(a)(3) and (f)(5)(i)). A power of appointment does not by itself defeat the requirement, and neither does state law that permits a trust to be modified after death; the regulation has rules for each (§ 1.401(a)(9)-4(f)(5)(ii) and (iii)).

Documentation for distributions after death is due by October 31 of the calendar year following the year of death. The trustee gives the plan administrator either a copy of the trust instrument or a certified list of all beneficiaries as of September 30 of that year, with the conditions on their entitlement; the plan administrator may decide which (§ 1.401(a)(9)-4(h)(1)(ii) and (h)(3)). For an IRA this step is not required: the trust documentation “need not be provided to the IRA trustee, custodian, or issuer” (Treas. Reg. § 1.408-8(b)(4)(ii)). On its terms that provision relieves only the documentation step; the other three requirements are unchanged.

Conduit and accumulation trusts

Which trust beneficiaries count depends on the type of trust, and the regulation defines two (§ 1.401(a)(9)-4(f)(1)(ii)):

• A conduit trust is a see-through trust whose terms provide that all distributions from the account “will, upon receipt by the trustee, be paid directly to, or for the benefit of, specified trust beneficiaries.”
• An accumulation trust is “any see-through trust that is not a conduit trust.” Nothing in that definition requires the trustee to pay out what it receives.

Two groups of trust beneficiaries are treated as beneficiaries of the account (§ 1.401(a)(9)-4(f)(3)(i)). The first applies to both types: any beneficiary who could receive account money from the trust without waiting for another beneficiary to die. The second applies only to an accumulation trust: any beneficiary who could receive amounts that were not distributed to the first group. That second group is why a remainder beneficiary counts in an accumulation trust and does not in a conduit trust.

Some beneficiaries are disregarded (§ 1.401(a)(9)-4(c)(2) and (f)(3)(ii)):

• a beneficiary of an accumulation trust who could take only because a remainder beneficiary died, unless that remainder beneficiary predeceased the owner or is also in the first group;
• a successor to a young beneficiary, where the trust requires full distribution to that individual by the later of the end of the year after the owner’s death and the end of the year of the tenth anniversary of the individual’s reaching majority (age 21), unless the successor is also in the first group;
• a beneficiary who, by September 30 of the year after the owner’s death, predeceased the owner, made a qualified disclaimer of the entire interest, or received the entire benefit to which that beneficiary was entitled.

How the payout period is set

Once the counted beneficiaries are known, the ordinary rules are applied to them as a group.

• Any counted beneficiary is not eligible. If there is more than one designated beneficiary and at least one is not an eligible designated beneficiary, the owner is treated as having no eligible designated beneficiary (§ 1.401(a)(9)-4(e)(2)(i)). The ten-year rule applies. In the regulation’s Example 3, a trust for a surviving spouse with a remainder to a sibling more than 10 years younger than the owner is held to the ten-year rule for this reason.
• All counted beneficiaries are eligible. Life-expectancy payments are permitted. The denominator is figured from the oldest designated beneficiary, and the account must be fully distributed within ten years after that oldest beneficiary dies (Treas. Reg. § 1.401(a)(9)-5(e)(3) and (f); § 1.401(a)(9)-4(f)(6), Example 4).
• The owner’s minor child is a counted beneficiary. The owner is treated as having an eligible designated beneficiary even if other counted beneficiaries are not eligible (§ 1.401(a)(9)-4(e)(2)(ii)). The final deadlines are then measured from the youngest such child’s reaching majority and from the death of all such children (§ 1.401(a)(9)-5(f)(2)(ii)).
• A counted beneficiary is not an individual. If a person other than an individual is a beneficiary, the owner is treated as having no designated beneficiary, even if individuals are also beneficiaries (§ 1.401(a)(9)-4(b)). Read together with the see-through rule, this reaches a charity or an estate that is a counted trust beneficiary.

A surviving spouse. Several spousal options depend on the spouse being the sole beneficiary. In the regulation’s Example 2, an accumulation trust pays income to the spouse with a remainder to a sibling; because the sibling is a counted beneficiary, the spouse is not the sole beneficiary, and the delayed start under § 401(a)(9)(B)(iv) is not available. Read together, the counting rules mean that the spouse is the only counted beneficiary of a conduit trust that pays every distribution to the spouse. One option is closed in every case. The election to treat an inherited IRA as the spouse’s own is not available when a trust is named as beneficiary, “even if the surviving spouse is the sole beneficiary of the trust” (§ 1.408-8(c)(1)(ii)). The spouse’s options outside a trust are on the spouse-versus-non-spouse page.

Whether a distribution is also due every year within a ten-year period, and how it is figured, is on the inherited-account RMD page.

Separate shares within one trust

Individuals named directly on an account can each use their own payout period if their shares are held in separate accounts. Beneficiaries of a single trust generally cannot: section 401(a)(9) “may not be applied separately to the separate interests of each of the beneficiaries of a see-through trust” (Treas. Reg. § 1.401(a)(9)-8(a)(1)(iii)(A)). The same paragraph makes the trust the payee for purposes of the excise tax on a missed distribution.

There is one exception. The rules are applied separately if the terms of the trust provide that it is to be divided immediately upon the owner’s death and the separate interests are held in separate see-through trusts (§ 1.401(a)(9)-8(a)(1)(iii)(B)). A trust is immediately divided only if, as of the date of death, it is terminated and there is no discretion over how post-death distributions from the account are allocated among the separate trusts. Administrative delay in carrying out the division does not defeat the exception, provided amounts received in the meantime are allocated as if the division had occurred at death (§ 1.401(a)(9)-8(a)(1)(iii)(C)).

Trusts for a disabled or chronically ill beneficiary

The statute has a special rule for an “applicable multi-beneficiary trust”: a trust with more than one beneficiary, all of whom are treated as designated beneficiaries, at least one of whom is disabled or chronically ill (§ 401(a)(9)(H)(iv) and (v)). Under the regulation, such a trust is a see-through trust whose terms identify one or more disabled or chronically ill individuals in the first counted group and provide that no other beneficiary has any right to the owner’s interest in the account until all of those individuals have died (§ 1.401(a)(9)-4(g)(1)). A charitable organization described in IRC § 408(d)(8)(B)(i), the provision that defines qualified charitable distributions, is treated as a designated beneficiary for this purpose (§ 1.401(a)(9)-4(g)(3)).

Three consequences follow. The disabled or chronically ill beneficiaries are treated as eligible designated beneficiaries even though other trust beneficiaries are not (§ 1.401(a)(9)-4(e)(2)(iii)). Only they are considered in finding the oldest beneficiary for the life-expectancy denominator (§ 1.401(a)(9)-5(f)(1)(ii)). And the ten-year period does not start until the last of them dies (§ 1.401(a)(9)-5(f)(2)(iii)). The definitions of disabled and chronically ill, and the proof required, are on the eligible-designated-beneficiaries page.

A trust that is not see-through

If any of the requirements is not met, nothing looks through the trust. A person that is not an individual is not a designated beneficiary, and the owner is treated as having none (§ 1.401(a)(9)-4(b)). The account is then paid out under the rules for accounts with no designated beneficiary: within five years if the owner died before the required beginning date, or over the owner’s remaining life expectancy if the owner died on or after it. Both are described on the inherited-account RMD page.

Income tax inside the trust

Income tax applies to the taxable income of property held in trust, and the tax is paid by the fiduciary (IRC § 641). A trust deducts amounts it distributes to beneficiaries, up to its distributable net income, and the beneficiaries include those amounts in their own income (IRC §§ 661 and 662; for a trust required to distribute all of its income currently, §§ 651 and 652). Read together, these provisions mean that taxable IRA distributions an accumulation trust keeps are taxed at the trust’s rates, while those a trust pays out in the same year are generally taxed to the beneficiary who receives them.

The trust rate schedule is compressed. For taxable years beginning in 2026, the 37 percent rate applies to an estate’s or trust’s taxable income over $16,000, compared with $640,600 for an unmarried individual (Rev. Proc. 2025-32). For taxable years beginning in 2027, the trust threshold is $16,500 (Rev. Proc. 2026-35).

The regulations’ provisions and examples involve a trust that pays income to a surviving spouse for life and leaves the remainder to others, a trust that must pay out in full to a young beneficiary by a deadline tied to majority, and a trust for a disabled or chronically ill beneficiary (§ 1.401(a)(9)-4(f)(3)(ii)(B), (f)(6), and (g)). Whether a trust also shields inherited funds from a beneficiary’s creditors is a question of state law that this page does not address.

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