In our Jupiter, Florida estate planning practice, we’re seeing a growing number of clients with significant retirement savings who want to know: Should I name a trust as the beneficiary of my IRA? The answer, like many things in estate planning, is: it depends.
If done right, naming a trust as the beneficiary of your IRA can protect your legacy, reduce taxes, and provide long-term financial security for your heirs. Done wrong, it can trigger Florida probate, expose your IRA to creditors, or lead to unnecessarily high tax rates—especially for high-net-worth families.
The Florida Angle: Why This Matters Here
Florida is a retirement haven. Many of our clients hold substantial assets in traditional IRAs or rollover 401(k)s and have complex family dynamics—second marriages, minor children, or vulnerable beneficiaries. A trust-based IRA strategy can offer peace of mind, control, and protection—but only if properly designed.
Conduit vs. Accumulation Trusts: Know the Difference
The IRS treats trust-held IRAs very differently depending on the trust structure. In Florida, where families often want to preserve wealth while avoiding federal tax traps, here’s what you need to know:
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Conduit Trust: Passes IRA distributions directly to beneficiaries. Taxes are paid at individual income tax rates—a better option for beneficiaries in lower tax brackets.
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Accumulation Trust: Retains IRA distributions inside the trust, which can protect spendthrift or vulnerable heirs. However, trust income over $15,650 in 2025 is taxed at the highest federal rate—37%.
The wrong trust structure can cost your family hundreds of thousands in unnecessary taxes over time.
Why Use a Trust as an IRA Beneficiary?
There are several strategic reasons Florida families may want to name a trust as an IRA beneficiary:
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Blended Families: Ensure your spouse receives income during their lifetime while preserving the principal for children from a prior marriage.
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Minor Children: Trusts can hold assets until your child comes of age, avoiding guardianship complications under Florida law.
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Asset Protection: Unlike retirement accounts during your lifetime, inherited IRAs are not protected from creditorsin Florida. A properly drafted trust can help shield assets from lawsuits, divorce, or bad decisions.
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Control Over Timing: A trust can regulate when and how distributions are made, protecting heirs from blowing through their inheritance.
RMD Pitfalls and the 10-Year Rule
If your trust doesn’t meet the IRS’s requirements for a “see-through trust,” it could trigger accelerated Required Minimum Distributions (RMDs)—meaning the IRA must be fully distributed (and taxed) within five years.
However, if your trust does qualify, the 10-year rule often applies, allowing greater tax deferral—critical for preserving wealth. Whether your trust qualifies depends on how it’s drafted and who the beneficiaries are.
This is not a DIY situation.
What High-Income Families in Florida Must Watch For
If you’ve worked hard to build a seven- or eight-figure nest egg, naming the wrong beneficiary could saddle your family with an avoidable tax burden. In 2025:
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The 37% federal income tax rate kicks in at just $15,650 of trust income
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Individual filers don’t hit that rate until $626,350
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Joint filers don’t hit it until $751,600
You do the math. A poorly designed trust could cost your heirs millions over their lifetimes.
The Bottom Line for Florida Residents
At Welch Law, PLLC, we help Florida families use trusts strategically—not just to “check a box,” but to protect wealth, honor family dynamics, and minimize tax exposure. If you have an IRA over $250,000 and care about who gets it, how, and when—it’s time for a conversation.
Let’s review your trust, your beneficiaries, and your plan. We’ll show you how to turn a tax trap into a tax-smart legacy.
By: Edward J. Welch, Esq. ||| Estate Planning | Wills | Trusts | Asset Protection
If you would like to discuss your legacy options with an estate planning attorney in Jupiter or Palm Beach Gardens, Florida, schedule a complimentary call with Edward J. Welch at Welch Law, PLLC. At Welch Law, WE WANT TO DRAFT YOUR LEGACY!
Reference: Think Advisor (June 18, 2025) “Trust as IRA Beneficiary? Avoid These Mistakes”
