See through trust

Key takeaway

A see through trust is a trust named as a retirement account beneficiary that meets federal requirements allowing specified trust beneficiaries to be treated as the account owner’s beneficiaries for required minimum distribution purposes.

Qualification comes before payout

All four requirements must be met:

The trust is valid under state law, or would be valid except that it has no assets.
The trust is irrevocable or, under its terms, becomes irrevocable when the account owner dies.
The beneficiaries who count are identifiable from the trust instrument.
The applicable trust documentation requirements are satisfied.

For an IRA, the trust documentation need not be provided to the IRA trustee, custodian or issuer.

Identifying the beneficiaries

Beneficiaries need not all be named individually. An identifiable class can qualify if each person eligible to receive the retirement interest through the trust can be identified, subject to special rules for powers of appointment and trust modifications.

If another trust is a beneficiary, its beneficiaries can count through the first trust only if the second trust independently satisfies the same four qualification requirements.

Qualification does not promise a particular payout

See through status alone does not determine the distribution schedule. The beneficiaries who count and their status affect which payout rules apply.

For a designated beneficiary who is not an eligible designated beneficiary, an inherited IRA or defined contribution account must be emptied by the end of the tenth calendar year following the owner’s death.

If the owner died on or after the required beginning date, that beneficiary must also take annual life expectancy distributions in the intervening years.

Conduit trust. A conduit trust requires all retirement plan distributions received by the trustee to be paid directly to, or for the benefit of, specified trust beneficiaries.

Accumulation trust. An accumulation trust is any see through trust that is not a conduit trust.

EstatePlanner.com resources

Retirement accounts and beneficiaries. Open this overview to place your trust questions alongside the rest of your retirement beneficiary planning. Use it to prepare for a conversation about the account and the people named to receive it.
Retirement account records and questions checklist. Use this checklist to organize account records and questions before reviewing the trust designation. Bring your questions about the trust instrument and documentation to that discussion.
Trusts. Read this guide when your next question concerns the trust itself. It provides a broader starting point for discussing the document and your intended beneficiaries.
Income tax, basis and trust taxation. Open this guide for a separate discussion of trust income taxation. Use it to frame tax questions beyond the retirement distribution schedule.

Common questions

Does every beneficiary have to be named?

No. An identifiable class can qualify under the identification requirements explained above.

Does naming a trust let a spouse treat the IRA as their own?

No. Naming a trust as the IRA beneficiary prevents the surviving spouse from making the election to treat that IRA as their own, even when the spouse is the trust’s sole beneficiary.

Sources

Treasury Regulation §1.401(a)(9)-4, trust qualification, identification and conduit and accumulation definitions.
Treasury Regulation §1.401(a)(9)-3, distribution deadline after death.
Treasury Regulation §1.401(a)(9)-5, annual distributions after death.
Treasury Regulation §1.408-8, IRA documentation exception and surviving spouse election.