1. Simplicity: Avoid Unnecessary Complexity and Expense

Trusts can be complex and expensive to maintain.

And when it comes to inheriting an IRA, they can create more problems than they solve.

While trusts give you more control over how your assets are used, they don’t offer any additional tax benefits when it comes to IRAs.

In fact, naming a trust as your IRA beneficiary often adds administrative headaches and legal fees without providing any real upside.

If you can transfer IRA assets directly to your loved ones — and avoid the extra layers of complexity and expense — that’s often the better route.

2. Avoid Punitive Trust Taxation

Taxation inside of trusts is brutal.

In 2025, any trust income over just $15,650 is taxed at 37% — and that’s before considering the 3.8% Medicare surtax on investment income.

That brings the top trust tax rate to a whopping 40.8%.

By comparison, your heirs may be in much lower tax brackets personally.

So, if your IRA pays out to a trust, and that trust then distributes income slowly, much of it could be taxed at some of the highest rates in the U.S. tax code.

In short: your beneficiaries could lose a huge portion of their inheritance to taxes — needlessly.

3. Triggering a 5-Year Liquidation (Instead of 10)

One of the biggest impacts of the SECURE Act was the elimination of the “stretch IRA” for most non-spouse beneficiaries.

Today, most heirs are required to fully liquidate an inherited IRA within 10 years.

But here’s the catch…

If a trust is the beneficiary of your IRA and it doesn’t meet specific qualifications, that timeline gets slashed to just 5 years.

That means your IRA could be taxed more quickly and more heavily — especially if your heirs are in their peak earning years.

Instead of enjoying tax-deferred growth and strategic withdrawals over a decade, your hard-earned savings could be forced out — and taxed — at an accelerated rate.

That means less money for your loved ones, and more for the IRS.

Final Thoughts: Time for an Estate Plan Review?

Estate planning is never one-size-fits-all.

But with the recent tax law changes and the unique nature of retirement accounts, it’s more important than ever to make sure your IRA beneficiary designations align with your long-term legacy goals.

Naming a trust as your IRA beneficiary may still make sense in some very specific scenarios — like special needs planning or spendthrift protections — but for most families, it’s no longer the tax-efficient option it once was.

If you haven’t reviewed your estate plan recently — or you’re unsure if your IRA is set up to transfer tax-efficiently — let’s chat.

A 30-minute conversation could save your heirs a fortune in taxes.