The
SECURE Act of 2019 reshaped how IRAs are inherited, ending the “stretch IRA” for most non-spouse beneficiaries. Instead of lifetime tax deferral, many heirs now face a
10-year window to fully distribute inherited retirement accounts — significantly accelerating taxes and reducing flexibility.
But recent IRS regulations have created a meaningful opportunity for proactive families:
subtrusts that preserve stretch treatment for certain beneficiaries.
What’s New — and Why It Matters
Before the 2024 IRS guidance, naming a
trust as the beneficiary of your IRA often meant
everyone in the trust defaulted to the 10-Year Rule — even if some were eligible for more favorable treatment.
Now, if that trust
splits into subtrusts upon death, each subtrust may apply its own distribution rules:
- Eligible Designated Beneficiaries (EDBs)
— like surviving spouses, chronically ill heirs, or minor children — can still stretch distributions over life expectancy.
- Non-Eligible Designated Beneficiaries (NEDBs)
— such as adult children — follow the 10-Year Rule.
This means estate plans can now better align tax treatment with each beneficiary’s unique needs.
Who Needs to Pay Attention?
This planning opportunity is especially relevant for:
- Families who’ve named
a trust as the IRA beneficiary
- Parents of
minor children or
special needs dependents
- Individuals concerned about
beneficiaries’ financial discipline, divorces, or creditors
- Anyone with a
large IRA or Roth IRA
wanting to preserve tax deferral for the next generation
Three Key Actions to Take Now
- Review Your Trust Documents
- Check IRA Beneficiary Designations
- Are your IRAs still naming a trust as a beneficiary?
- Would individual designations now make more sense?
- Coordinate with Your Advisory Team
- Your estate attorney, financial advisor, and tax professional should work together.
- The goal: protect your legacy while minimizing tax burdens for your heirs.
Why This Matters
This isn’t just about compliance — it’s about
preserving your wealth and intentions across generations.
- Stretch IRAs
are still possible, but only with intentional trust design.
- Subtrust planning gives you
greater control, tax deferral, and peace of mind.
- Taking action now may help avoid unnecessary tax erosion later.
Let’s Talk
If you’ve named a trust as your IRA beneficiary — or just want to make sure your estate plan still reflects your goals — now is the time to act.
