What Is a See-Through Trust?

A see-through trust is a vehicle through which individuals can pass retirement assets from their individual retirement accounts (IRAs), via a trust, to their chosen beneficiaries. See-through trusts allow IRA owners to choose the beneficiaries of the account after their death. But very specific limitations and logistical requirements apply to theౠse vehicles.

Understanding See-Through Trusts

In order to set up a trust as a 澳洲幸运5官方开奖结果体彩网:designated beneficiary of a retirement account, several💜 requirements must be satisfied, including the following:

1. The trust must be valid and legal under state law, which typically means the trust document must be witnessed and 澳洲幸运5官方开奖结果体彩网:notarized.
2. The trust must be irrevocable upon the plan owner’s death. The listed beneficiaries can be changed up until the IRA owner passes away, but not after.
3. All beneficiaries must be easily identifiable, eligible, and legally named.
4. Documentation of the see-through trust must be provided to the 澳洲幸运5官方开奖结果体彩网:custodian of the IRA by October 31 of the year following the IRA owner’s death. The regulations governing the trust and how it relates to the distribution of the IRA are part of 26 Code of Federal Regulations Section 1.401(a)(9).

Required Minimum Distributions (RMDs)

Although an IRA owner can name any beneficiary they choose for their IRA, Congress limits the duration of these accounts and other similar retirement accounts to prevent them from lasting indefinitely after the original IRA owner's death. Therefore, beneficiaries must take 澳洲幸运5官方开奖结果体彩网𝓡:required minimum distributions (RMDs). This rule ensures the accounts are 𝓰liquidated over time.

To calculate the RMDs, see-through trusts rely on the life expectancy of the beneficiary. As such, see-through trusts present a unique advantage, in that if there are several beneficiaries, they may split up the IRA into separately inherited IRAs, rather than all beneficiaries having to use the oldest beneficiary’s lifetime for the RMD calculations. Simply put: see-through trusts don’t restrict the beneficiaries to a one-size-fits-all distr♏ibution schedule.

Other Trust Types

See-through trusts aren’t the only game in town. Another type of common trust is a marital trust or 澳洲幸运5官方开奖结果体彩网:fiduciary relationship between a trustor and trustee, which benefits the surviving spouse and any heirs of th♎e married couple.

Also called an "A" trust, a marital trust takes effect when the first spouse dies. Assets are moved into the trust upon death, and the income that these assets generate funnel to the surviving spouse. When the second spouse dies, the tr🍷🌟ust then passes to its designated heirs.

The Bottom Line

A see-through trust is an effective tool for passing retirement assets from an IRA to beneficiaries, as it offers flexibility in distributing the assets based on each beneficiary's life expectancy.

To ensure the trust is valid, it must meet several requirements, including being legally valid under state law, irrevocable upon the IRA owner's death, and with identifiable and eligible beneficiaries. While see-through trusts provide advantages, other types of trusts, such as marital trusts, can also be used depending on the individual’s needs.