You saved for retirement because you wanted to provide security for yourself and the people you love. But if your trust is named as the beneficiary of your IRA, current withdrawal and tax rules may affect how much protection—and how much money—your family actually receives. Here is what families with retirement accounts should review in 2026. Read more…

You did the work. You saved for retirement, created an estate plan, and named beneficiaries because you wanted the people you love to be protected.

Perhaps you named your trust as the beneficiary of your IRA because you did not want a child to receive a large inheritance all at once. Maybe you wanted to protect the money in case of a divorce, lawsuit, addiction, financial trouble, or poor decision-making.

That choice may have made perfect sense when you created your plan.

But retirement account rules have changed. If no one has reviewed your trust and IRA beneficiary designation since the SECURE Act became law, your plan may no longer work the way you intended.

The issue is not simply whether your family will receive the money. The issue is how quickly the money must leave the IRA, who controls it after it leaves, and how much of it could be lost to taxes.

In 2026, a trust reaches the highest federal income tax bracket of 37% when it has more than $16,000 in taxable income. A single person does not reach that same bracket until taxable income exceeds $640,600.

That is a dramatic difference, but the tax rate is only one part of the decision. The larger question is this: What do you want your retirement savings to make possible for the people you love?

The SECURE Act Changed What Happens to an Inherited IRA

To understand the problem, it helps to begin with what happens when someone inherits a traditional IRA.

Money inside a traditional IRA has generally not been taxed yet. Taxes are usually paid when money is withdrawn from the account. The longer the money remains inside the IRA, the longer it may continue growing without being taxed.

Before 2020, many people who inherited an IRA could spread those withdrawals over their expected lifetime. A younger beneficiary might have been able to take smaller withdrawals over several decades.

The SECURE Act changed that rule for most people who inherit retirement accounts.

Now, many beneficiaries must withdraw all the money from an inherited IRA within 10 years. In some cases, they must also take withdrawals during those 10 years instead of waiting until the final year to empty the account.

This shorter timeline can create a larger tax burden. If your adult child inherits your IRA during their highest-earning years, the required IRA withdrawals may be added to income from a job, business, investments, or other sources.

The rules are different for certain eligible beneficiaries, including a surviving spouse, a qualifying minor child, a disabled or chronically ill beneficiary, or someone close to the original account owner in age.

The rules can become even more complicated when a trust—not an individual person—is named as the beneficiary.

The trust must be written correctly to qualify for certain inherited IRA rules. If it qualifies as a “see-through trust,” the IRS may look through the trust and base the withdrawal rules on the people who will ultimately benefit from it.

If the trust does not qualify, the IRA may have to be emptied under a different and potentially less favorable schedule. Depending on when the IRA owner dies and whether required minimum distributions had begun, that could mean a five-year withdrawal period or a schedule based on the original owner’s remaining life expectancy.

This is why the IRA, the beneficiary form, the trust language, and the people who will inherit must be reviewed together.

The bottom line: Your IRA does not exist separately from your estate plan. The SECURE Act changed the rules your plan must follow.

Why the $16,000 Tax Bracket Matters

A trust has its own income tax brackets, and those brackets are much more compressed than the tax brackets for an individual.

In plain language, that means a trust can reach a high tax rate with a relatively small amount of taxable income.

For 2026, the federal income tax brackets for estates and trusts are:

• 10% on the first $3,300 of taxable income;
• 24% on taxable income from $3,300 to $11,700;
• 35% on taxable income from $11,700 to $16,000; and
• 37% on taxable income over $16,000.

These are marginal tax brackets. Crossing the $16,000 line does not mean every dollar is suddenly taxed at 37%. Only the taxable income within the highest bracket is taxed at that rate.

Still, a trust reaches that top bracket much faster than an individual person does.

Imagine that your trust inherits your IRA. The IRA then makes a taxable withdrawal to the trust. If the trust keeps that money instead of distributing it to your child, the trust may owe income tax on it at the trust’s tax rates.

That can become expensive quickly.

The obvious response may seem to be, “Then just give all the money to my child so the trust does not pay the higher tax.”

Sometimes that is the right answer. Sometimes it defeats the entire reason the trust was created.

Your child may be going through a divorce. They may own a business and have signed personal guarantees. They may struggle with addiction, spending, creditors, or an unstable relationship. They may simply be too young or inexperienced to manage a large amount of money.

Giving the money directly to your child may lower the immediate tax bill, but it may also expose the inheritance to the exact risks you wanted the trust to prevent.

The bottom line: The $16,000 figure is a warning to review the plan. It is not an automatic instruction to distribute all the money.

Two Families With the Same IRA May Need Different Plans

Suppose two parents each have a $500,000 IRA and want to leave it to an adult child.

The first adult child has a stable career, a strong marriage, no significant debt, and experience managing money. The parents may be comfortable allowing IRA withdrawals to pass directly to that child.

The second adult child is in the middle of a divorce, owns a business carrying substantial debt, or has difficulty managing money. Those parents may care more about keeping the inheritance protected, even if doing so could result in a higher tax bill.

The account balance is the same, but the families do not need the same plan.

One option may be a conduit trust. When the trust receives a withdrawal from the IRA, the trust generally passes that money on to the beneficiary. Because the money is distributed, it is generally reported on the beneficiary’s individual income tax return rather than being retained and taxed inside the trust.

This may result in a lower tax rate, but the money is now in the beneficiary’s hands. Once distributed, it may no longer have the same protection from creditors, lawsuits, divorce, or poor financial decisions.

Another option may be an accumulation trust. This type of trust may allow the trustee to keep IRA withdrawals inside the trust instead of immediately distributing them to the beneficiary.

Keeping the money in the trust may provide greater protection, but retained taxable income may be subject to the trust’s compressed tax brackets.

Neither type of trust is automatically better. The right structure depends on the people involved and what you want the inheritance to accomplish.

We must consider the beneficiary’s age, maturity, health, marriage, debt, work, financial experience, and other resources. We also need to consider whether protecting the money is more important than giving the beneficiary immediate access to it.

The bottom line: The best plan is not necessarily the one with the lowest tax bill. It is the one that balances taxes, protection, and your family’s actual needs.

Your Beneficiary Form Can Override the Rest of Your Plan

Many people believe their will or trust controls everything they own when they die. That is not always true.

An IRA generally passes according to the beneficiary designation kept by the financial institution. It does not usually pass according to the instructions in your will.

That small beneficiary form can control what happens to one of your largest assets.

You may have beautifully prepared estate planning documents sitting in a binder, but an old beneficiary designation can send your IRA somewhere else.

The form may still name a former spouse. It may name an adult child directly even though your current plan says the child’s inheritance should remain protected in a trust. It may name a trust that has since been amended or replaced.

Even if the correct trust is named, the trust language may have been written before the SECURE Act changed the inherited IRA rules. The form and the trust may technically match while still creating a tax or withdrawal result you did not expect.

Reviewing only the trust is not enough. Reviewing only the beneficiary form is not enough. We need to place them side by side and ask whether they still accomplish the same goal.

Your attorney may also need to coordinate with your financial advisor, CPA, and insurance professional. Each person is responsible for a different piece, but all those pieces must work together.

The bottom line: Your IRA beneficiary designation is part of your estate plan, even though it is not stored inside your estate planning documents.

Tax Savings and Inheritance Protection Are Not the Same Thing

It is tempting to judge an estate plan by how little tax it creates. Taxes matter, but paying the least possible tax is not every family’s only goal.

Suppose distributing an IRA withdrawal directly to your child would lower the income tax. That sounds like a clear win until you learn that your child is divorcing, being sued, facing creditors, or struggling with addiction.

A lower tax bill will not feel like a victory if the remaining inheritance is lost.

On the other hand, keeping every dollar inside a highly restrictive trust may not make sense for a responsible adult child who could use the money wisely to buy a home, educate their children, start a business, or build a secure future.

A good plan considers both sides.

We want to understand the tax cost of keeping money protected and the personal cost of distributing it outright. Then you can make an informed decision based on your priorities instead of allowing the tax rules to make the decision for you.

The bottom line: Tax efficiency is important, but it should support your family’s goals—not replace them.

Protecting Money Is Only Part of Preparing Your Family

Parents often say they want to protect an inheritance without controlling their children from the grave. That is an important distinction.

A trust should provide a stronger foundation for the next generation. It should not prevent capable beneficiaries from growing, making decisions, and building lives of their own.

That means we must ask questions that do not appear on an IRA beneficiary form.

Do your children understand why you created the trust? Do they know why some money may remain protected instead of being handed to them immediately? Have you chosen a trustee who understands both the legal responsibility and the person whose life will be affected?

Does your trustee know when a distribution may be appropriate? Does your family know whom to call when the IRA owner dies? Do your financial advisor, CPA, and attorney understand the plan?

The legal documents matter, but the people carrying out the plan matter just as much.

A trust can protect the inheritance. A relationship-based estate planning process can also prepare your family, preserve important information, and give the people you love someone to call when decisions must be made.

The bottom line: Protecting the money and preparing the people who will receive it are two separate jobs. A strong estate plan does both.

Your Estate Plan Must Change When Your Life Changes

The plan that worked five years ago may not work today.

Your IRA may have grown significantly. A child may have married or divorced. A beneficiary may have developed health, addiction, creditor, or financial problems. Your chosen trustee may no longer be the right person for the job.

The law may also have changed since your documents were signed.

That does not necessarily mean your original plan was wrong. It means estate planning is not a one-time transaction.

You should have the opportunity to review these changes while you are alive and able to make choices. Waiting until after your death leaves your family to work with the documents and beneficiary forms exactly as they exist at that moment.

An ongoing relationship with your estate planning attorney also gives your family a place to turn when the plan must be carried out. They should not have to search for accounts, interpret complicated documents, and introduce themselves to a stranger while they are grieving.

When your attorney already knows your plan, your family, and what your wealth was intended to accomplish, the legal process becomes more personal and less overwhelming.

The bottom line: Your documents create the plan, but an ongoing relationship helps keep that plan connected to your real life.

What You Can Do Right Now

If your estate plan was created before the SECURE Act, your IRA has grown, or a trust is named as your beneficiary, now is a good time to review the entire plan.

Begin by locating your current IRA beneficiary designation. Do not assume the form says what you remember choosing years ago.

Then review that form alongside your trust and the rest of your estate plan. Ask:

• Is the correct person or trust named?
• Does the trust qualify for the inherited IRA treatment we expect?
• How quickly will the IRA have to be withdrawn?
• Will withdrawals be distributed to the beneficiary or retained in the trust?
• Who will pay the income tax?
• What protections could be lost if the money is distributed?
• Have the law, account value, or beneficiary’s circumstances changed?

These questions do not always have simple answers, but your family should not discover the answers after your death.

What You Can Do Right Now

If your estate plan predates the SECURE Act, your IRA has grown, or a trust is named as beneficiary and no one has reviewed the decision recently, bring the whole plan back to the table.

As a Personal Family Lawyer firm, I help you create a Life & Legacy Plan that coordinates your family, assets, beneficiary designations, legal documents, and advisor team. The relationship doesn’t end when the documents are signed. When something happens, your family knows to call me.

Schedule a Life and Legacy Planning Session and let’s find out where you stand.

This article is a service of Florida Wills & Trusts Law, a Personal Family Lawyer® Firm. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Life & Legacy Planning® Session, during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love. You can begin by calling our office today to schedule a Life & Legacy Planning Session.

The content is sourced from Personal Family Lawyer for use by Personal Family Lawyer firms, a source believed to be providing accurate information. This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal, or investment advice. If you are seeking legal advice specific to your needs, such advice services must be obtained on your own, separate from this educational material.

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