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Naming a Revocable Trust as Your IRA Beneficiary: Smart Strategy or Tax Mistake?
You’ve saved diligently in your IRA, built a comfortable retirement nest egg, and set up a family trust to avoid probate and streamline your estate.
And then—because it feels like the safe, responsible thing to do—you name your trust as the beneficiary of your IRA. But here's the problem...
In the post–SECURE Act world, naming a revocable living trust as the beneficiary of a Traditional IRA can unintentionally trigger a tax disaster for your heirs. Instead of a steady stream of income over a lifetime, they may be forced to drain the account—and pay taxes on the entire balance over just several years at the highest marginal tax brackets.
We’re talking about six- or even seven-figure IRAs being distributed in ways that not only defeat your estate planning goals but also crush your heirs with avoidable taxes.
This isn’t theoretical, it’s happening now. And with compressed trust tax brackets, a badly structured trust can push your retirement dollars into the 37% federal tax bracket, sometimes with just $16,000 of income.
More specifically, Cameron discusses:
- When should you consider naming your family living trust/revocable living trust as a beneficiary of your retirement account?
- What are the potential consequences of naming a trust as the beneficiary of your retirement account?
- How should my trust be structured in order to pass retirement assets to my beneficiaries in the most tax-efficient manner?
- What if my one of my trust beneficiaries is a charity?
- What if I name my trust as a beneficiary of my Roth IRA?
Resources From The Episode:
- Retired-ish Newsletter Sign-Up
- Access Show Notes Here
- Schedule a Discovery Call for a Free Tax-Optimized Retirement Playbook
Key moments:
(04:41) When Naming a Trust as the Beneficiary of Your IRA Makes Sense
(10:22) Potential Issues with Trusts as Beneficiaries of a Retirement Account
(17:55) Why Trusts Fail to Qualify as a “See-Through” Trust
(21:52) Tax Implications of Trusts as Beneficiaries
(27:42) Charities as Beneficiaries of Your Retirement Accounts and Trusts
(31:44) Roth IRAs: A Potential Solution
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By Cameron ValadezYou’ve saved diligently in your IRA, built a comfortable retirement nest egg, and set up a family trust to avoid probate and streamline your estate.
And then—because it feels like the safe, responsible thing to do—you name your trust as the beneficiary of your IRA. But here's the problem...
In the post–SECURE Act world, naming a revocable living trust as the beneficiary of a Traditional IRA can unintentionally trigger a tax disaster for your heirs. Instead of a steady stream of income over a lifetime, they may be forced to drain the account—and pay taxes on the entire balance over just several years at the highest marginal tax brackets.
We’re talking about six- or even seven-figure IRAs being distributed in ways that not only defeat your estate planning goals but also crush your heirs with avoidable taxes.
This isn’t theoretical, it’s happening now. And with compressed trust tax brackets, a badly structured trust can push your retirement dollars into the 37% federal tax bracket, sometimes with just $16,000 of income.
More specifically, Cameron discusses:
- When should you consider naming your family living trust/revocable living trust as a beneficiary of your retirement account?
- What are the potential consequences of naming a trust as the beneficiary of your retirement account?
- How should my trust be structured in order to pass retirement assets to my beneficiaries in the most tax-efficient manner?
- What if my one of my trust beneficiaries is a charity?
- What if I name my trust as a beneficiary of my Roth IRA?
Resources From The Episode:
- Retired-ish Newsletter Sign-Up
- Access Show Notes Here
- Schedule a Discovery Call for a Free Tax-Optimized Retirement Playbook
Key moments:
(04:41) When Naming a Trust as the Beneficiary of Your IRA Makes Sense
(10:22) Potential Issues with Trusts as Beneficiaries of a Retirement Account
(17:55) Why Trusts Fail to Qualify as a “See-Through” Trust
(21:52) Tax Implications of Trusts as Beneficiaries
(27:42) Charities as Beneficiaries of Your Retirement Accounts and Trusts
(31:44) Roth IRAs: A Potential Solution