An IRA can provide an important inheritance, but its tax rules differ from the rules for a home or ordinary investment account. A useful plan coordinates the beneficiary form, the beneficiary’s needs, and the distribution rules that apply after the account owner’s death.
Begin with the beneficiary designation
Review the primary and contingent beneficiaries with the account custodian. A will generally does not override a valid IRA beneficiary designation. If no effective designation applies, the custodial agreement’s default provisions may determine the recipient.
Naming an individual may be appropriate when an outright inheritance fits the circumstances. Naming a trust may be worth considering for a minor, a person receiving means-tested benefits, or another beneficiary who needs ongoing management. The decision should consider both control and tax consequences.
Do not confuse naming a trust with transferring the IRA
A trust can be named as the beneficiary of an IRA at death. That is different from attempting to retitle the IRA into a living trust during the owner’s lifetime. An inappropriate lifetime transfer or distribution can trigger income tax and other consequences.
When a trust is named as beneficiary, carefully drafted provisions and required documentation may allow qualifying individual beneficiaries to be considered under the retirement distribution rules. Those requirements are often described as the rules for a see-through trust.
A trust that does not meet those requirements is not necessarily an invalid beneficiary. Instead, different distribution rules may apply. Charitable beneficiaries, powers of appointment, and other trust terms can affect the analysis.
Apply the current inherited-account rules
Many designated beneficiaries must empty an inherited IRA by the end of the tenth calendar year after the owner’s death. When the owner dies on or after the required beginning date, annual distributions may also be required during that period. Eligible designated beneficiaries and some older inheritances follow different rules.
A surviving spouse may have additional choices. The right course depends on age, cash needs, account type, and the other relevant circumstances. Inherited Roth accounts have distribution requirements even when withdrawals are not taxable.
Balance control and income taxes
Traditional IRA distributions are generally taxable, subject to any applicable basis or other exception. A trust does not automatically reduce that tax. Taxable income retained in a nongrantor trust can reach higher tax brackets more quickly than income taxed to an individual.
The plan should address whether retirement distributions pass promptly to a beneficiary or may remain in trust, and how that choice affects protection, benefits, and taxes. Coordinate the lawyer’s advice with the custodian and tax adviser before making changes.
Contact Verras Law to review how your retirement accounts fit with the inheritance you intend to provide.
Sources: IRS inherited IRA and trust rules; IRS fiduciary income-tax instructions.
Updated October 26, 2026.