Before proceeding, please review the  legal disclaimer.

Can a Trust Own an IRA? What Texas Families Need to Know

When it comes to retirement planning and asset protection, many Texans turn to IRAs (Individual Retirement Accounts) and trusts as tools to build and preserve wealth. But can the two work together? More specifically, can a trust own an IRA?

This is a common estate planning question—and an important one. The answer is no, a trust cannot own an IRA during the account holder’s lifetime, but a trust can be named as the beneficiary of an IRA upon the account holder’s death. This distinction is crucial when planning how your retirement savings will be handled and passed on.

At The Lange Firm, we help individuals and families across Texas make informed estate planning decisions that include trusts, IRAs, and other critical financial tools. Let’s explore how trusts and IRAs can work together—and what you need to watch out for.

Can a Trust Own an IRA During Life?

No. Under IRS rules, IRAs must be owned by an individual—not a business, corporation, or trust. The word “individual” is literally in the name: Individual Retirement Account.

So, you cannot:

• Transfer your IRA into a trust while you’re alive
  
  
• Title your IRA in the name of a trust
  
  
• Change the ownership of the account to your trust
  
  

Doing so would result in a taxable event—potentially triggering income taxes and penalties that could defeat the purpose of your IRA.

Can a Trust Be the Beneficiary of an IRA?

Yes. While a trust cannot own an IRA, it can be named as the beneficiary of your IRA after your death.

This means:

• You maintain full control of the IRA during your lifetime
  
  
• After you pass away, the funds in the IRA are transferred to the trust
  
  
• The trustee then manages and distributes the funds according to your instructions
  
  

Naming a trust as your IRA beneficiary is a powerful way to control how your retirement assets are used—especially if you want to provide for minor children, protect assets from creditors, or plan for special needs beneficiaries.

When Does It Make Sense to Name a Trust as IRA Beneficiary?

Naming a trust as the beneficiary of your IRA can be beneficial if you want to:

✅ Protect Heirs from Themselves

If you’re concerned about a beneficiary who is financially irresponsible, a trust can ensure the IRA is distributed in controlled amounts over time.

✅ Provide for Minor Children

Minors cannot inherit directly, so using a trust allows you to name a trustee to manage and distribute the funds for them.

✅ Preserve Government Benefits for a Special Needs Beneficiary

If a loved one receives SSI, Medicaid, or other means-tested benefits, a properly structured special needs trust can protect their inheritance without disqualifying them.

✅ Avoid Immediate Payouts

A trust can prevent beneficiaries from cashing out the IRA immediately—avoiding large tax bills and quickly depleted funds.

Types of Trusts That Can Inherit an IRA

If you decide to name a trust as the IRA beneficiary, it must meet strict IRS rules to avoid accelerated taxation. There are two common structures:

✅ See-Through (Look-Through) Trusts

These allow the IRS to “see through” the trust to the underlying beneficiaries and apply favorable tax treatment.

To qualify:

• The trust must be valid under state law
  
  
• The trust must be irrevocable or become irrevocable at death
  
  
• The beneficiaries must be identifiable
  
  
• A copy of the trust must be provided to the IRA custodian within 9 months of death
  
  

See-through trusts can be:

• Conduit Trusts – Require all IRA distributions to be passed directly to beneficiaries
  
  
• Accumulation Trusts – Allow the trustee to retain IRA distributions in the trust (more protective, but complex for tax purposes)
  
  

✅ Discretionary Trusts

These give the trustee flexibility in how and when to distribute funds. Useful for asset protection, but may result in higher tax rates if income is retained in the trust.

📌 Choosing the right structure is critical. The wrong setup could lead to an IRA being taxed over 5 years instead of being stretched over the beneficiary’s life expectancy.

What About the SECURE Act?

The SECURE Act of 2019 changed the rules for IRA inheritance:

• Most non-spouse beneficiaries must withdraw all IRA funds within 10 years of the account owner’s death
  
  
• Exceptions exist for disabled or chronically ill beneficiaries, minors (until they reach 18), and beneficiaries not more than 10 years younger than the account owner
  
  

Trusts that are carefully drafted can still take advantage of these exceptions—but it requires precise language and legal strategy.

Why You Should Consult an Attorney Before Naming a Trust as IRA Beneficiary

Naming a trust as an IRA beneficiary adds complexity. Without proper planning, you could:

• Trigger accelerated income taxes
  
  
• Disqualify a special needs beneficiary from government benefits
  
  
• Accidentally override your broader estate plan
  
  
• Confuse or burden your trustee with unclear instructions
  
  

At The Lange Firm, we help you coordinate your IRA, will, and trust to work together smoothly—so your family is protected and your wishes are honored.

How The Lange Firm Helps with IRAs and Trusts

We help clients across Texas:

• Decide whether a trust should be named as an IRA beneficiary
  
  
• Draft valid, IRS-compliant trust documents
  
  
• Coordinate with financial advisors and CPAs to optimize tax outcomes
  
  
• Update existing estate plans in light of the SECURE Act
  
  
• Avoid probate delays and protect beneficiaries from financial or legal risks
  
  

📞 Schedule a consultation with The Lange Firm to ensure your retirement assets are handled wisely and legally.

Final Thoughts

So, can a trust own an IRA? No—but it can inherit one. And when done correctly, naming a trust as your IRA beneficiary can be a powerful part of your estate plan.

✅ If you want to preserve your retirement savings, protect your loved ones, and avoid costly mistakes, contact The Lange Firm for trusted guidance.