When to Name a Trust as an IRA Beneficiary (And When Not To)
When it comes to retirement accounts like IRAs, few decisions are more important—or more overlooked—than naming your beneficiaries. Too often, people set it and forget it. But failing to keep your beneficiaries up to date can cause significant issues, from unintended heirs to probate delays, and even unnecessary taxes.
I believe your beneficiary designations should be reviewed at least once a year—typically during your annual review—and updated immediately after any major life event like a marriage, divorce, birth, or death. It only takes a few minutes, but the impact can be life-changing for your loved ones.
One of the most common questions I hear is:
"Should I name my trust as the beneficiary of my IRA?"
In most cases, my answer is no. Naming individual beneficiaries—spouses, children, or other heirs—directly allows for easier and often more tax-efficient distribution. Under the SECURE Act, non-spouse beneficiaries typically must deplete inherited IRAs within 10 years, but they still enjoy some flexibility with how and when to take distributions.
However, there are situations when naming a trust as your IRA beneficiary makes sense:
When It Might Be Smart to Name a Trust as Your IRA Beneficiary
Minor Children
If you’re leaving IRA assets to young children, a trust can help manage those funds until they reach a more responsible age.Beneficiaries with Special Needs
A properly drafted trust can protect eligibility for government assistance while still providing financial support.Spendthrift Concerns
If you’re concerned that a beneficiary might quickly burn through an inheritance, a trust can help control how and when money is distributed.Blended Families
A trust may be used to ensure that both your current spouse and children from a previous marriage are provided for according to your wishes.
That said, naming a trust adds a layer of complexity. The trust must be carefully written to qualify as a "see-through" or "look-through" trust under IRS rules; otherwise, it could accelerate required distributions and increase the tax burden.
If the trust language isn’t aligned with your IRA goals or if it hasn’t been reviewed in years, it could backfire.
Why Beneficiary Designations Are So Critical
Your IRA doesn’t go through your will. It goes directly to the named beneficiary. That means:
If your ex-spouse is still listed, they’ll get the money—even if you’ve remarried.
If no one is listed, your IRA may go through probate, delaying access and potentially shrinking the inheritance.
If your trust is improperly named or structured, your heirs may face costly tax consequences.
Bottom line: Naming beneficiaries is one of the simplest, most effective estate planning tools you have. But it only works if it's done thoughtfully and kept up to date.
Final Thoughts
While naming a trust as an IRA beneficiary can be the right move in some cases, it’s not a one-size-fits-all solution. The key is understanding your family dynamics, financial goals, and tax implications.
If you’re unsure about how your beneficiaries are set up or whether a trust makes sense in your situation, let’s talk. This is too important to leave to chance.
📞 Call us at (405) 993-6296
🌐 To learn more about what we offer at Olive Branch Wealth Management, please visit www.OBWMLLC.com
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Disclosure:
All content discussed in this article is for informational and educational purposes only and does not constitute financial, legal, tax, or investment advice. Opinions expressed are solely those of Olive Branch Wealth Management, LLC and its staff. The information presented is believed to be from reliable sources; however, Olive Branch Wealth Management, LLC makes no representations as to its accuracy or completeness. This article shall not be construed as an offer to sell or a solicitation to purchase any insurance product in any jurisdiction in which the agent is not licensed. Topics should be discussed with a licensed insurance agent, tax professional, or financial adviser before implementation.
