Should You Name a Revocable Trust as an IRA Beneficiary? 

When planning how to pass down an individual retirement account (IRA), a common question may arise: should you ever name a revocable trust as the beneficiary? While trusts are valuable estate planning tools, they can also introduce unnecessary complications when linked to types of investment account that are designed to sustain people during their golden years.

This is exactly the dilemma one of our clients recently faced. After doing some research on his behalf, we at Bastion Fiduciary concluded that naming a revocable trust as an IRA beneficiary is generally not advisable unless specific circumstances apply. Here’s why.

1. A Tax Loophole…to Nowhere

“A shortcut is the longest distance between two points.” — Charles Issawi (Economist)

The SECURE Act of 2019 profoundly reshaped the rules for inherited IRAs. Previously, non-spouse beneficiaries could stretch withdrawals over their lifetimes, allowing them to enjoy tax-deferred growth for decades. Now, most non-spouse beneficiaries must withdraw the full balance within 10 years.

Furthermore, a trust won’t bypass this rule—and in many cases, it can actually make tax efficiency worse by restricting strategic withdrawal options.¹

2. Get Trust, Go Bust?

“I am proud to be paying taxes in the United States. The only thing is—I could be just as proud for half the money.” —Arthur Godfrey (Radio Host)

Trust taxation is far more aggressive than individual tax brackets. In 2024, trusts hit the top federal tax rate of 37% with just $15,200 in income, while a single filer doesn’t reach that bracket until $578,125.

If an inherited IRA’s distributions stay in the trust—as is common in accumulation trusts—a large portion of the inheritance could be lost to unnecessarily high taxes.²

3. The Long Arm of the (Tax) Law

“If you think compliance is expensive, try non-compliance.” — Paul McNulty (U.S. Deputy Attorney General)

Naming a trust as an IRA beneficiary can make things far more complicated than necessary. The IRS has strict requirements for a trust to qualify as a “see-through” trust, which allows trust beneficiaries to be treated as designated beneficiaries. If the trust fails to meet these requirements, the entire IRA must be distributed within five years—not ten.

To put that into perspective: if your taxable income is $100,000 and you inherit a $500,000 IRA, being forced to withdraw it over five years instead of ten could result in an additional $67,160 in federal taxes over that period.³

4. P.O.D. for R.I.P.

“The time to repair the roof is when the sun is shining.” —John F. Kennedy (U.S. President)

For most people, a far simpler solution is available: direct beneficiary designations.

By logging into your brokerage account, you can name your desired heirs (and contingent heirs, in case the primary beneficiary predeceases you). Marking accounts “payable-on-death” (POD) or “transfer-on-death” (TOD) avoids probate delays, allowing your heirs to access the funds almost immediately while preserving tax efficiency.⁴

5. The Burden of Lofty Estate

“Inheritance taxes are so high that the happiest mourner at a rich man’s funeral is usually Uncle Sam.” —Olin Miller (Humorist Author)

The current federal estate tax exemption is $12.99 million per individual in 2025. That means the vast majority of estates—including the one we recently reviewed at our firm—aren’t subject to federal estate tax.

Given this high exemption threshold, using a trust purely for estate tax reduction is unnecessary for most individuals.⁵

6. Strings Attached: a Lifeline or a Leash?

“There’s a level of protection you need to give to your kids, and then sometimes you need to just let them figure out things on their own.” —Brody Jenner (Reality TV Star)

Despite the drawbacks, there are some situations where naming a trust as an IRA beneficiary makes sense, such as:

• Protecting a spendthrift beneficiary from poor financial decisions
• Ensuring structured distributions for a minor beneficiary
• Preserving government benefits for a special needs heir
• Coordinating charitable giving in a strategic manner

If any of these factors apply, a trust could be the right solution—but these are exceptions, not the rule. If your heirs don’t need extra restrictions, **why add unnecessary complexity?**⁶

Conclusion: A Trust is Usually Unnecessary

“The greatest wealth transfer in history is happening right now. Don’t let poor planning turn it into the greatest tax event instead.” — Unknown

For most individuals, naming a revocable trust as an IRA beneficiary introduces unnecessary complications and potential tax inefficiencies.

Instead, direct beneficiary designations—whether to individuals or charities—are often the simpler, tax-efficient solution. Trusts remain a powerful estate planning tool, but their role in IRA inheritance should be carefully evaluated to avoid unintended consequences.

At our firm, we prioritize clear, tax-efficient estate planning strategies tailored to each client’s unique situation. If you’re considering a trust for your IRA, consult a qualified financial advisor to ensure your plan aligns with your goals while minimizing tax burdens for your heirs.