Naming a Trust as Your IRA Beneficiary: How See-Through Trusts Work in Rhode Island

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There is a persistent misconception in estate planning that you cannot — or should not — name a trust as the beneficiary of your IRA or 401(k). You have probably heard some version of it: “IRAs can’t go into a trust.” “Naming a trust will blow up the distribution rules.” “Just name your kids directly.”

All of that is either wrong or incomplete. You can name a trust as the beneficiary of a retirement account. And for the right client — someone who wants control over how an IRA is distributed after death, protection from a beneficiary’s creditors, or a coordinated plan for a surviving spouse and children — a properly structured trust can be far more powerful than a simple outright designation.

The catch is the word “properly.” A generic revocable living trust named as IRA beneficiary without specific drafting attention will trigger unfavorable tax treatment. The solution is a see-through trust — a trust that meets four specific requirements under federal tax law, allowing the IRS to look through the trust entity to the individual beneficiaries behind it. When those requirements are met, a trust delivers the same distribution treatment as naming an individual directly, while also adding asset protection, distribution control, and the ability to coordinate your retirement accounts with the rest of your estate plan.

Here is what a see-through trust actually is, how it works, and how to evaluate whether one makes sense for your IRA.

At a Glance

  • You can name a trust as IRA beneficiary — the key is drafting it to qualify as a see-through trust under Treas. Reg. Section 1.401(a)(9)-4(f)(2).
  • Done correctly, a see-through trust provides asset protection, distribution control, and coordination with your broader estate plan — benefits a simple individual designation cannot.
  • Two types: conduit trusts (all distributions flow through immediately to beneficiaries — simpler, cleaner) and accumulation trusts (trustee may hold distributions inside the trust — more control and protection, stricter drafting).
  • The SECURE Act replaced the lifetime “stretch” with a 10-year rule for most non-spouse beneficiaries — but a properly drafted trust still gives the trustee real control over how distributions happen within that window.
  • Final Treasury Regulations effective January 1, 2025 require annual RMDs during years 1-9 of the 10-year window when the account owner died after their required beginning date.
  • Rhode Island’s $50,000 pension income deduction (R.I. Gen. Laws Section 44-30-12(c)(9)) flows to individual beneficiaries through a conduit trust but not through accumulated distributions at the trust level — a meaningful factor in the conduit-vs-accumulation choice for RI clients.

The Misconception: Why People Think You Cannot Name a Trust

Retirement accounts — traditional IRAs, Roth IRAs, 401(k)s, SEP-IRAs — pass by beneficiary designation form, not through your will or revocable living trust. That part is true, and it trips up clients regularly: someone spends weeks getting a revocable living trust in place, retitles their house, updates their bank accounts, and assumes they are done. The IRA, though, still goes directly to whoever is named on the form at the custodian — the trust has nothing to do with it unless you specifically name the trust as beneficiary.

The confusion about whether you should name a trust runs deeper. Congress defined “designated beneficiary” under IRC Section 401(a)(9)(E)(i) as an individual. A trust is not an individual. If you simply name a trust without additional structure, the IRS treats the account as having no designated beneficiary at all — triggering the harshest possible distribution rules: a 5-year payout if the owner died before the required beginning date, or an unfavorable “ghost life expectancy” calculation if after.

That outcome is the result of doing it wrong, not proof that it cannot be done. Federal regulations under 26 C.F.R. Section 1.401(a)(9)-4 provide a specific framework — the see-through trust rules — that lets a properly drafted trust achieve the same distribution treatment as an individual beneficiary, while adding layers of control and protection that a bare outright designation never could.

What a See-Through Trust Is — and What It Requires

A see-through trust (also called a look-through trust) qualifies as a designated beneficiary under Treas. Reg. Section 1.401(a)(9)-4(f)(2) by meeting all four of the following requirements:

1. Valid trust under state law.
In Rhode Island, a standard revocable living trust satisfies this. Under R.I. Gen. Laws Section 18-4-27, a revocable living trust is valid and explicitly not invalidated by the fact that the settlor retains the power to revoke or amend it during life.

2. Irrevocable at the owner’s death.
A standard revocable living trust satisfies this automatically — it becomes irrevocable the moment the trust creator dies. You do not need a separate irrevocable trust created during your lifetime.

3. Identifiable beneficiaries.
This is where generic trust drafting most often fails. Every person who could potentially receive a distribution from the trust — including contingent remainder beneficiaries — must be identifiable from the trust document itself. If your trust says “to such charitable organizations as my trustee shall select,” that is a problem. Charities and non-individual entities are not designated beneficiaries, and their presence can taint the entire trust’s see-through status.

4. Trust documentation provided to the plan administrator.
For IRA accounts, you will need to contact the custodian for their specific requirements. The documentation deadline is October 31 of the year following the owner’s death. Each custodian (Fidelity, Vanguard, Schwab, and others) has its own process; some require a copy of the full trust agreement, others accept a certification. This is an administrative step that must actually happen — the default rules apply if it does not.

A trust that meets all four requirements is treated as if the individual beneficiaries were named directly. Which individual beneficiaries count — and under what rules — depends on whether the trust is a conduit or an accumulation trust.

Conduit vs. Accumulation: The Choice That Matters Most

Once a trust qualifies as a see-through trust, the next decision shapes everything else: conduit or accumulation?

Conduit Trusts

In a conduit trust, every IRA distribution the trustee receives must be passed through immediately to the current income beneficiaries. Nothing sits inside the trust. The IRS treats only those current beneficiaries as the designated beneficiaries — remainder beneficiaries (even charities waiting in the wings) are disregarded entirely.

The advantage: simplicity and cleaner drafting. Because remainder beneficiaries are ignored, it is easier to satisfy the identifiable-beneficiaries requirement.

The trade-off: once IRA money is distributed to the beneficiary, it is fully exposed to their creditors. There is no accumulation, no protection from divorce, no trustee discretion over when the money flows out.

Accumulation Trusts

In an accumulation trust, the trustee can hold IRA distributions inside the trust rather than paying them out immediately. This creates real discretion over timing and preserves spendthrift protection — which matters significantly after Clark v. Rameker, 573 U.S. 122 (2014). In that case, the U.S. Supreme Court held that inherited IRAs held outright by a beneficiary are not protected in bankruptcy. An inherited IRA held by an outright beneficiary is considered a windfall, not retirement savings, and creditors can reach it. A properly drafted accumulation trust with a spendthrift clause may restore that protection under Rhode Island spendthrift law.

The trade-off: stricter drafting requirements. Because distributions can accumulate inside the trust rather than pass through, the IRS does not disregard contingent beneficiaries. Every potential beneficiary — including contingent remaindermen — must be an identifiable individual. A charity as a remainder beneficiary, even a well-intentioned one, can disqualify the accumulation trust’s favorable treatment for the entire account.

For clients with beneficiaries who face creditor risk, addiction concerns, divorce exposure, or other vulnerability, the accumulation trust’s control and protection can make the drafting complexity worthwhile. For clients with straightforward family structures, a conduit trust is often the cleaner path.

The 10-Year Rule and What It Means for Your Beneficiaries

The SECURE Act of 2019 fundamentally changed how inherited retirement accounts work. Under IRC Section 401(a)(9)(H), most non-spouse beneficiaries can no longer “stretch” distributions over their own lifetime. Instead, the entire account must be distributed by the end of the 10th calendar year after the owner’s death.

A narrow group of eligible designated beneficiaries (EDBs) can still use the lifetime stretch:

  • A surviving spouse
  • A minor child of the participant (until the child reaches majority, then the 10-year clock starts)
  • A disabled individual under IRC Section 72(m)(7)
  • A chronically ill individual
  • An individual not more than 10 years younger than the account owner

For most trusts with adult children as beneficiaries, the 10-year rule applies. This does not eliminate the usefulness of a see-through trust; it just means that all distributions must come out within 10 years, and the trustee controls how that happens within the window.

The 2025 Surprise: Annual RMDs During the 10-Year Window

This is the piece that surprised most practitioners and clients during the transition period. Final Treasury Regulations TD 9930, effective for distribution calendar years beginning January 1, 2025, settled a deeply contested question: if the account owner died after their required beginning date and the beneficiary is a non-EDB, annual RMDs are required during years 1 through 9 of the 10-year window. The account must still be fully distributed by year 10, but you cannot simply skip distributions and take everything as a lump sum in year 10.

For accumulation trusts where the trustee was planning to defer, this matters operationally. The trustee must take annual distributions from the IRA each year — and then decides whether to distribute them to trust beneficiaries or hold them inside the trust (subject to trust income tax rates on accumulated income).

When Naming a Trust as IRA Beneficiary Actually Makes Sense

Given the complexity, it is fair to ask: when should you actually do this? The answer depends on what you are trying to accomplish.

Asset protection for the beneficiary. After Clark v. Rameker, an outright inherited IRA is legally exposed to a beneficiary’s creditors in bankruptcy. If your intended beneficiary is a physician with malpractice exposure, a business owner with personal guarantees, or anyone with creditor risk on the horizon, an accumulation trust with a spendthrift clause may be worth the drafting effort.

Control over beneficiaries who cannot manage a lump sum. For a beneficiary with addiction issues, a spending disorder, or a problematic marriage heading toward divorce, trustee discretion over the timing and size of distributions within the 10-year window provides meaningful protection. The trustee cannot indefinitely delay distributions (particularly if annual RMDs are required), but can control how discretionary distributions flow to the beneficiary.

Blended family situations. A QTIP-style see-through trust for a surviving spouse gives that spouse access to income while preserving the remainder for the first spouse’s children from a prior marriage — a common need in second marriages.

Special needs beneficiaries. Under IRC Section 401(a)(9)(H)(v), an applicable multi-beneficiary trust that includes a disabled EDB can allow the EDB’s share to use the lifetime stretch, even if other non-EDB beneficiaries are present in the same trust. This requires careful drafting to separate each beneficiary’s interests.

Two Rhode Island Wrinkles Worth Knowing

The RI Pension Deduction

Rhode Island provides a meaningful state tax benefit that interacts directly with this planning. Under R.I. Gen. Laws Section 44-30-12(c)(9), for tax years beginning January 1, 2025, RI residents who have reached full Social Security retirement age can deduct up to $50,000 of pension and annuity income (subject to AGI phase-outs).

This deduction is personal to the individual recipient. With a conduit trust, IRA distributions pass through directly to the individual beneficiary, who may be able to claim the deduction if they qualify. With an accumulation trust, distributions held inside the trust do not receive the deduction at the trust level — trust income is taxed at compressed trust tax rates without access to this state benefit. For RI clients whose trust beneficiaries will be at or near retirement age and likely qualify for the deduction, conduit treatment may produce better combined state-and-federal outcomes.

The Section 691(c) IRD Deduction

Retirement account distributions are income in respect of a decedent (IRD) — there is no stepped-up basis, and every dollar is fully taxable as ordinary income to whoever receives it. For estates large enough to owe Rhode Island estate tax (the RI threshold in 2026 is $1.8 million), there is a federal income tax deduction available under IRC Section 691(c) that partially offsets this double hit. The income beneficiary — whether an individual or a trust — can deduct a proportionate share of the federal estate tax attributable to the retirement account.

Where a trust is the named beneficiary, the Section 691(c) deduction flows through to trust income beneficiaries in proportion to distributions received. This deduction is chronically under-claimed, and for large retirement accounts in taxable estates, it can be meaningful. Make sure your CPA knows to look for it in the year distributions are received.

The Titling Trap

One final, purely mechanical point: after the account owner’s death, an inherited IRA must be titled in a specific format: “[Decedent’s name], IRA (deceased [date]), for the benefit of [beneficiary’s name].” Retitling the account in the beneficiary’s own name — without the inherited designation — is treated as a full taxable distribution. This mistake is irreversible once made.

What Rhode Island Families Should Do: A See-Through Trust Checklist

If you have retirement accounts and a revocable living trust — or are thinking about creating one — here is the practical sequence:

Step 1: Audit your beneficiary designations. Pull every retirement account you own. Log in, find the beneficiary designation, and write down exactly who is named (primary and contingent). Do not assume it matches your current wishes. For most clients, the answer is a mix of outdated names, missing contingents, and designations that have not been touched in a decade.

Step 2: Understand that your existing trust is not automatically the beneficiary. Signing a revocable living trust does not update your IRA beneficiary forms. You must contact each plan administrator or IRA custodian separately and submit a new beneficiary designation form.

Step 3: Decide whether naming a trust makes sense for your situation. Ask three questions: (a) Does the intended beneficiary have creditor exposure, addiction risk, or a shaky marriage? (b) Is any beneficiary an EDB — disabled, a surviving spouse, a minor child, or within 10 years of your age? (c) Does the RI pension income deduction matter for the beneficiaries? Those answers will point toward conduit, accumulation, or simply naming individuals outright.

Step 4: Have the trust drafted or reviewed specifically with the see-through requirements in mind. A generic revocable living trust likely does not address the identifiable beneficiary requirement for accumulation treatment, and may not satisfy conduit requirements either. This is drafting-level work, not a checkbox.

Step 5: Deliver trust documentation to each IRA custodian per their specific process. The October 31 deadline (year following death) applies to documentation submission after the owner’s death — but getting the right documents in place before then is the planning step. Ask each custodian what they require and confirm it is on file.

This kind of coordinated beneficiary planning is exactly what Aptt Law’s estate planning practice and trusts work are built for — making sure your trust, your beneficiary designations, and your tax situation are all pointing in the same direction.

If you have questions about whether a see-through trust belongs in your plan, a planning conversation with Aptt Law is the right next step. Call (401) 264-0654 or visit apttlaw.com to schedule time with Geoffrey.

This post is for general educational purposes and does not constitute legal advice; consult a qualified attorney about your specific situation.

Geoffrey M. Aptt, Esq. is the principal attorney at Aptt Law LLC in East Greenwich, RI. Aptt Law is an estate planning, trust and estate administration, and business law firm. To schedule a planning conversation, call (401) 264-0654 or visit apttlaw.com.