Naming a Trust as IRA Beneficiary: Conduit vs. Accumulation in 2026

Most beneficiary forms take thirty seconds. You write a spouse’s name, then the children’s names in equal shares, and the retirement account passes outside the will to people who can do whatever they want with it. That last clause is the whole reason some families name a trust instead. A child going through a divorce, a grandchild who is nine, an adult son who has never held onto money, a second marriage where the account should support the surviving spouse and then go to the first family: in each of those cases “whatever they want” is the problem, and a trust is the tool that solves it.

The tax code does not object to a trust inheriting an IRA. It simply applies a different set of rules, and since the 2019 SECURE Act and the final regulations the IRS issued in July 2024, those rules punish trusts that were drafted for a world that no longer exists. A trust written in 2015 to stretch an IRA over a child’s lifetime may now force the entire account out to that child within ten years, defeating the reason it was written, or hold the money inside the trust at a 37% federal rate that starts at $16,000 of income. This article covers how the IRS looks at a trust that inherits a retirement account, the difference between conduit and accumulation trusts, what the 10-year rule does to each, and how we think about the design decision for the household that owns the account today. It is the owner’s side of the question. If you are the one who inherited, our inherited IRA 10-year rule article and the Inherited Retirement Accounts guide are the beneficiary’s playbook.

What the IRS Sees When a Trust Inherits

Every inherited retirement account is sorted into a category, and the category sets the withdrawal clock. An individual beneficiary is a designated beneficiary and gets the 10-year rule. A narrow group of eligible designated beneficiaries (a spouse, the owner’s minor child until 21, a disabled or chronically ill individual, or anyone not more than 10 years younger than the owner) can still take life-expectancy payments. And a beneficiary that is not a person at all, such as an estate or a charity, gets the worst schedule: everything out within five years if the owner died before their required beginning date, or annual payments over what would have been the owner’s remaining life expectancy if the owner died after it.

A trust is not a person. Left to the default rule, a trust would land in that last category. The regulations provide an escape: if the trust meets the see-through requirements (sometimes called look-through), the IRS looks past the trust to the human beneficiaries behind it and treats them as the designated beneficiaries. Under Treasury Regulation §1.401(a)(9)-4, a see-through trust must be valid under state law, must be irrevocable at the owner’s death or become irrevocable by its terms at that moment, and must have beneficiaries who are identifiable from the trust instrument. There is a fourth requirement, delivery of the trust document or a beneficiary list to the plan administrator by October 31 of the year after death, but the 2024 final regulations carved IRAs out of it. Under §1.408-8(b)(4)(ii), effective for 2025 and later years, the documentation “need not be provided” to an IRA custodian. It still applies to 401(k) and other employer plans, which is one of several reasons a trust-as-beneficiary design is easier to run on an IRA than on a plan. “Irrevocable at death” is also not a lifetime commitment. The trust can be a subtrust inside your revocable living trust or a trust created under your will, and the beneficiary form itself stays changeable until you die; only the version in force at that moment has to be locked.

Being identifiable is looser than it sounds. The beneficiaries do not need to be named; “my descendants, per stirpes” works, as long as it is possible to identify each person who could receive the retirement money through the trust. What the IRS actually needs is the age of the oldest countable beneficiary, because that age can drive the payout schedule, and which trust beneficiaries count is where conduit and accumulation trusts diverge.

Conduit Trusts: The Pipe

A conduit trust is a see-through trust whose terms require that every distribution the trustee receives from the retirement account be paid out, on receipt, directly to or for the benefit of specified beneficiaries. The trust is a pipe. Money enters from the IRA and exits to the beneficiary in the same motion; the trustee has no authority to hold it.

The reward for that design is simplicity in the beneficiary test. Because nothing can accumulate, only the current beneficiary is counted. Remainder beneficiaries who would take if the current beneficiary died are disregarded, so a conduit trust for a 45-year-old child with a charity as the remainder taker is tested on the child alone. And because the money passes straight through, it is taxed on the beneficiary’s return at the beneficiary’s rates, never at the trust’s.

The cost is what happened to conduit trusts after the SECURE Act. Before 2020, a conduit trust for a child passed out only the annual required distribution, which for a young beneficiary was a small percentage of the account, so the “pipe” leaked slowly and the trust kept meaningful control for decades. Under the 10-year rule, the pipe has to empty the entire account by the end of the tenth year after death, and every dollar that comes out must go to the beneficiary. A conduit trust for a non-eligible beneficiary is therefore a ten-year delay of an outright inheritance, not a substitute for one. If the reason for the trust was that the child should not have unrestricted access to a seven-figure account, a conduit trust no longer delivers that.

Conduit trusts still do one thing better than anything else: they preserve eligible designated beneficiary treatment. A conduit trust whose sole current beneficiary is the surviving spouse is treated as if the spouse were the sole beneficiary, so the spouse’s life-expectancy schedule applies and, if the owner died before their required beginning date, the trustee can wait to start distributions until the year the owner would have reached RMD age. The same holds for a disabled child or a sibling within ten years of the owner’s age. What a trust cannot do, even for a spouse who is the only beneficiary, is the spousal election to treat the IRA as the spouse’s own; §1.408-8(c)(1)(ii) says that election requires the spouse to be the sole beneficiary with an unlimited right to withdraw, and naming a trust fails that test even if the spouse is the trust’s sole beneficiary. A family that wants the spouse to have the rollover option and also wants the remainder protected for children from a prior marriage is choosing between two things the law will not give them at once, and that trade should be made on purpose.

Accumulation Trusts: The Reservoir

Any see-through trust that is not a conduit trust is an accumulation trust. The trustee may hold retirement distributions inside the trust, invest them, and pay them out over time under whatever standard the document sets: health, education, support, a percentage each year, or full discretion. This is the design that actually delivers control, creditor and divorce protection, and management for a beneficiary who should not receive a lump sum. The creditor point has a specific legal basis. In Clark v. Rameker (2014), the Supreme Court held that an inherited IRA is not “retirement funds” under the federal bankruptcy exemption, so an heir who inherits outright holds an account their creditors can reach. Texas is one of the states that closed that gap by statute (Property Code §42.0021 expressly exempts inherited IRAs), but the protection follows the beneficiary’s state of residence when a claim arises, which the owner cannot control from the beneficiary form. A trust that holds the money is protection that travels.

It pays for that in two places.

First, in the beneficiary test. Because money can accumulate, the regulations count not only the current beneficiary but also anyone who could receive the accumulated retirement money later: the remainder beneficiaries. The 2024 final regulations narrowed this considerably. A remainder beneficiary who could receive the money only because a countable remainder beneficiary died is disregarded, which removes the old problem of a charity or an elderly relative three contingencies deep tainting the whole trust. There is also a specific rule for trusts built around a young beneficiary: if the trust must distribute the retirement money outright to that person by the later of the end of the year after the owner’s death or the year that includes the tenth anniversary of their 21st birthday, then contingent takers behind that person are ignored. Even narrowed, the rule bites. If any countable beneficiary of an accumulation trust is not an eligible designated beneficiary, the trust as a whole is treated as having no eligible designated beneficiary, and the 10-year rule applies to everyone, including a spouse or a disabled child who would have qualified for life-expectancy payments outright. The regulations carve out one exception: if one of the countable beneficiaries is the owner’s own minor child, the trust is still treated as having an eligible designated beneficiary, so life-expectancy payments continue (measured, as always, on the oldest countable beneficiary) until that child, or the youngest such child, reaches 21, and the 10-year clock starts then. The oldest countable beneficiary’s age sets the annual payment schedule where one applies.

Second, in the tax rate. Money the trustee keeps inside the trust is taxed to the trust, and the 2026 brackets for estates and trusts are compressed almost to nothing: 10% on the first $3,300 of taxable income, 24% up to $11,700, 35% up to $16,000, and 37% on everything above $16,000. A married couple does not reach the 37% bracket until taxable income exceeds $768,700, which is 48 times as high. Retirement distributions are ordinary income, so an accumulation trust that receives a large IRA distribution and keeps it is paying the top federal rate on nearly all of it.

The trustee has a lever. Trust income that is distributed to a beneficiary in the same year (or, under the 65-day election in §663(b), by early March of the following year) carries out to the beneficiary and is taxed at the beneficiary’s rate instead (for a minor beneficiary, that usually means the parents’ rate under the kiddie tax). An accumulation trust does not have to accumulate; it has the option to. So the practical design is a trustee who takes the required amount from the IRA each year, then decides, beneficiary by beneficiary and year by year, how much to pass through at the beneficiary’s rate and how much to keep at the trust’s rate because control is worth the cost that year.

The 10-Year Clock Inside a Trust

The 10-year rule as applied to trusts has two versions, and which one applies depends on when the owner died.

If the owner died before their required beginning date (April 1 of the year after reaching RMD age, which is 73 for owners born 1951 through 1959 and 75 for those born in 1960 or later; the 1959 figure rests on proposed regulations the IRS has not yet finalized), the trust has no annual minimum. The only deadline is December 31 of the tenth year after death, by which the entire account must be distributed to the trust. The trustee can take nothing for nine years and everything in year ten, or level amounts, or whatever the tax picture suggests.

If the owner died on or after that date, the 2024 final regulations settled a question that had been open for four years: the trust must take annual required distributions in years one through nine, calculated on the life expectancy of the oldest countable beneficiary (or the owner’s own remaining life expectancy, if that is longer), and then empty the account by the end of year ten. The IRS waived the penalty for missed annual payments through 2024 while the rules were being finalized; from 2025 on, they are enforced.

Neither version cares whether the trust is conduit or accumulation. The difference is what happens to each distribution once it arrives: through the pipe to the beneficiary, or into the reservoir at the trustee’s discretion.

Two related points from the regulations matter for design. A trust can name another trust as its beneficiary, and the second trust’s beneficiaries are treated as beneficiaries of the first, provided the second trust also meets the see-through requirements. And where a single trust divides at the owner’s death into separate subtrusts, one per child, the final regulations allow the retirement rules to be applied separately to each subtrust, so a subtrust for a disabled child can take life-expectancy payments while a subtrust for a healthy adult child runs on the 10-year rule. Under the prior rules, the least favorable beneficiary’s schedule governed the whole trust. Three drafting conditions attach. The division must be written into the trust and take effect at death, with the master trust terminating; the share of the retirement account going to each subtrust must be fixed in the document, with no trustee discretion over the allocation; and a trustee’s later decision to split a trust that was not drafted this way does not qualify. Not every beneficiary needs a separate subtrust, either. The regulations apply the tests to each subtrust, so a trust can divide into one subtrust for the eligible beneficiary and one for everyone else.

What the Trust Rate Actually Costs

Put numbers on the accumulation choice. A $1,200,000 traditional IRA passes at death to an accumulation trust for a 50-year-old child. The owner died after the required beginning date, so the trust must take an annual minimum in years one through nine. In the first year the divisor is the child’s single life expectancy at age 51, which is 35.3, producing a required distribution of about $34,000. That is the floor, not the plan; the trust still has to be empty by year ten, so a level schedule is closer to $120,000 a year before growth, and higher still if the account keeps compounding.

If the trustee keeps $120,000 in the trust, the 2026 trust brackets produce federal tax of about $42,300, an effective rate of just over 35%. If the trustee instead passes the same $120,000 through to the child and every dollar of it lands in the child’s 24% bracket, the tax is $28,800. The difference, roughly $13,500 in one year, is the price of control on that year’s distribution. Over a ten-year drawdown at that pace it approaches $135,000. If the child’s other income already reaches the 32% bracket, the gap narrows to under $4,000 a year, and the trust rate stops being the decisive factor. The retained versus distributed decision is a rate comparison, and it is made each year on the beneficiary’s actual return, not once at drafting.

This is also the strongest argument for pairing an accumulation trust with a Roth IRA rather than a traditional one. Distributions from an inherited Roth are tax-free whether they land in the trust or pass through it, so the trust’s 37% bracket is reached only by the growth on money the trustee retains, not by the retirement distributions themselves. A household that wants a trust to control a large IRA for the next generation, and that is doing Roth conversions in its own lower-income years anyway, can eliminate most of the trust-rate penalty before the trust ever receives a dollar. Whether those conversions make sense depends on whose rate is higher, the owner’s today or the heirs’ later, and that is a family-level modeling question, not a rule; we walked through it in our Roth conversion planning article. The same 10-year deadline still applies to the inherited Roth, but without annual minimums, since a Roth owner is always treated as having died before the required beginning date.

Trusts That Still Get the Stretch

The 10-year rule has one built-in escape for trusts, and it exists for families with a disabled or chronically ill beneficiary. The form of applicable multi-beneficiary trust that matters here is a see-through trust with more than one beneficiary in which all beneficiaries are designated beneficiaries, the trust identifies one or more disabled or chronically ill individuals as current beneficiaries, and no other beneficiary has any right to the retirement money until every one of those individuals has died. Meet that definition and the disabled beneficiary is treated as an eligible designated beneficiary regardless of who takes the remainder, so the trust can take life-expectancy payments over that beneficiary’s lifetime. A qualified charity may be the remainder beneficiary without breaking the structure; the regulations treat the charity as a designated beneficiary for this one purpose. It is the one place where a trust can still hold an inherited IRA for decades, and it fits naturally with a special needs trust designed to preserve public benefits. Disability or chronic illness must exist at the owner’s death, not develop afterward, and for employer plans the medical documentation must reach the administrator by October 31 of the year after death; IRAs are again exempt from delivering it to the custodian.

Two other structures come up in this conversation.

The first is a charitable remainder trust named as IRA beneficiary, which is the closest thing left to a lifetime stretch and is sometimes sold as one. The mechanics come straight from Section 664. The IRA is distributed to the trust in full, and because the trust is tax-exempt, no income tax is due on receipt. The trust then pays the heir a fixed percentage of its value, between 5% and 50%, for life or for a term of up to 20 years, and whatever remains goes to charity. Three constraints do the work. The remainder passing to charity must be worth at least 10% of the starting value on an actuarial basis, which a lifetime unitrust cannot pass for a young beneficiary, since even the 5% minimum payout over a long life expectancy leaves the charity too little, and which pushes those families toward a term of years. The four-tier ordering rule treats every payment as ordinary income first, so the IRA dollars come out to the heir as ordinary income for years before anything more favorable reaches them. And the payments must be made outright, which means a charitable remainder trust delivers an income stream, not control: the heir cannot take more than the payout, and what arrives is exposed to their creditors and their divorce the day it lands. If the heir dies early, the remainder goes to charity, not to the heir’s children. For a family with real charitable intent, that trade can be exactly right; we covered the lifetime version and our lean toward exhausting the simpler tools first in our charitable remainder trusts article, and the same lean applies here. One Texas footnote: the payments the heir receives face no state income tax here, which is not true in most of the country. And a related product, the “trusteed IRA” some custodians offer, behaves like a conduit trust written into the account agreement, so it inherits the same ten-year limit and adds a trustee you may not be able to replace.

The second is the simplest one. For the surviving spouse, naming the spouse outright and the trust as contingent beneficiary often beats naming the trust first, because the spouse keeps the rollover and the disclaimer window (nine months, before accepting any benefit) lets the account fall to the trust as contingent beneficiary if the plan calls for it at that point; a qualified disclaimer cannot direct where the money goes, so the contingent designation has to be right in advance.

How We Think About It

We lean toward naming a trust as IRA beneficiary only when the trust is solving a problem that a trust is good at, and not to save income tax. Creditor and divorce protection, a minor or a beneficiary who is not ready for a lump sum, a blended family, special needs planning, a family that wants one document to control every account: those are trust reasons, and they have not changed. What has changed is that a trust that inherits a retirement account no longer buys tax deferral, and it usually costs some. This is a different question from trust-based estate tax planning. Grantor trusts, swap powers, and the spousal and intentionally defective trust structures we use for estates large enough to face the estate tax all work with assets that can be moved during life; a retirement account cannot be gifted or swapped into any of them, so the IRA reaches a trust only at death, as a taxpayer rather than a shelter. If none of the trust reasons apply to the IRA, the outright designation is simpler, cheaper, and gives the heir the full ten years of their own bracket to work with.

When a trust is the right answer, we lean toward the accumulation design, sized against its cost. A conduit trust for a non-eligible beneficiary is ten years of delay followed by outright ownership, which is rarely what the family meant. An accumulation trust delivers the control; the annual retained-versus-distributed decision, made on the beneficiary’s actual return, is what keeps the trust rate from consuming it. That is a job for a trustee who understands the choice and an advisor who will run the numbers each year, and the document should give the trustee the discretion to make it.

We lean toward conduit design in exactly the cases where eligible designated beneficiary treatment is the prize: a spouse who needs the life-expectancy schedule, a disabled beneficiary outside an applicable multi-beneficiary trust, a sibling within ten years of the owner’s age. There, the pipe preserves something the reservoir would forfeit, and where a family has both kinds of beneficiary, the subtrust rules let one document run a conduit share for the eligible beneficiary and an accumulation share for everyone else.

And we lean toward asking which account the trust should inherit before asking which trust. A traditional IRA left to an accumulation trust is the most expensive combination in this article. A Roth IRA left to the same trust is close to the cheapest. For a household that has decided a trust must control the retirement money, that difference is often a better argument for lifetime Roth conversions than any the conversion math makes on its own, but it is one input to the family-level model, not a conclusion, and the model has to include the heirs’ likely rates, the owner’s current bracket, and what else the estate holds, and it is never done at the expense of the owner’s own retirement security. Beneficiary forms, trust drafting, and conversion planning are one decision wearing three sets of paperwork.

Common Questions

Does naming a trust as IRA beneficiary avoid the 10-year rule?

No. A see-through trust is tested on its human beneficiaries, and if they would be subject to the 10-year rule outright, the trust is too. A trust delays or controls how the money reaches the beneficiary; it does not extend the deadline. The exceptions are trusts whose countable beneficiaries are all eligible designated beneficiaries, and applicable multi-beneficiary trusts for disabled or chronically ill beneficiaries, which can take life-expectancy payments.

What is the difference between a conduit trust and an accumulation trust?

A conduit trust must pay every retirement distribution straight through to the beneficiary when the trustee receives it; the beneficiary pays the tax, only the current beneficiary counts for the IRS test, and the trust offers no control over the money once distributed. An accumulation trust may hold distributions and pay them out under the trust’s terms; it delivers control, but retained income is taxed at trust rates, which reach 37% above $16,000 in 2026, and remainder beneficiaries count in the IRS test.

Can my spouse still roll over the IRA if I name a trust for their benefit?

Not through the ordinary election. The regulations allow a surviving spouse to treat an inherited IRA as their own only if the spouse is the sole beneficiary with an unlimited right to withdraw, and naming a trust fails that test even when the spouse is the trust’s only beneficiary. A conduit trust for the spouse preserves the spouse’s life-expectancy schedule and, if the owner died before the required beginning date, the ability to delay distributions until the owner would have reached RMD age, but not the rollover. Naming the spouse outright with the trust as contingent beneficiary keeps both options open.

Do old trusts drafted before the SECURE Act need to be rewritten?

Often, yes. A conduit trust drafted before 2020 to stretch an IRA over a child’s life now forces the entire account out to the child within ten years, which may defeat its purpose, and an accumulation trust drafted under the old beneficiary-counting rules may count or omit the wrong people under the 2024 regulations. Any trust named on a retirement account should be reviewed against the current rules, and the review should happen while the owner is alive, because the trust cannot be fixed after death except through limited disclaimer (nine months) and reformation windows, the latter closing by September 30 of the year following death.