Many IRA owners have named trusts as their IRA beneficiaries. You may be one. Trusts offer control from the grave and can be a smart choice, especially to protect beneficiaries who may be minors, have special needs or simply are not good with money. Naming a trust as an IRA beneficiary has always had its problems. The rules are complicated and having a trust drafted and administered can come with a hefty price tag. The ability to stretch RMDs over a trust beneficiary’s lifetime, however, was often enough to outweigh the negatives. The SECURE Act changes this equation.
Enter the SECURE Act
Under the SECURE Act, most beneficiaries will no longer get the stretch. Instead, most beneficiaries, including trusts, will be subject to a 10-year payout rule. That means all the funds in the inherited IRA must be paid out either to the trust or the trust beneficiaries within 10-years.