Final Regs Offer Clarity for Trusts As Retirement Account Beneficiaries

Final IRS regulations released in 2024 provide significant guidance on the use of trusts as retirement account beneficiaries. Because the SECURE Act bifurcated account beneficiaries into two groups: designated beneficiaries and eligible designated beneficiaries (EBD), the classification of trust beneficiaries is now important in determining whether the stretch distribution option or ten-year rule applies. When a conduit trust is used, the retirement account distributions must be distributed immediately to beneficiaries. Only the beneficiaries who will receive those distributions are considered retirement account beneficiaries. Accumulation trusts allow the funds to accumulate in the trust. When an accumulation is named beneficiary, both primary beneficiaries who can receive the funds without contingency and residual beneficiaries who only receive the funds after a primary beneficiary’s death are treated as retirement account beneficiaries. The regs also provide important guidance for trusts with multiple beneficiaries and those with chronically ill or disabled beneficiaries. For more information on these rules, visit Tax Facts Online. Read More: Link to Q3907. Note: Q is updated.