Trusts, IRAs, and the New RMD Rules: What Trustees Need to Know in 2025

In October 2025 estate planners and trustees are facing a new challenge: the final required minimum distribution (RMD) regulations under the SECURE Act. These rules, which came into full effect on January 1 2025, fundamentally change how inherited retirement accounts must be handled, particularly when a trust is named as beneficiary. Trustees and executors who administer estates with IRAs can no longer rely on the flexible “stretch IRA” rules of the past; the landscape now requires careful compliance and thoughtful drafting.

This article explains the new RMD framework, highlights how it affects see‑through trusts, conduit trusts and accumulation trusts, and offers practical guidance for trustees and estate planners. Whether you’re managing an existing trust or drafting a new estate plan, understanding these changes is essential to protecting heirs and avoiding costly mistakes.

From Stretch to Ten-Year: The SECURE Act’s Transformation

For decades, non‑spouse beneficiaries could stretch distributions from inherited IRAs over their lifetime, allowing assets to grow tax‑deferred for many years. The original SECURE Act (2019) ended that “stretch” for most non‑spouse beneficiaries and replaced it with a ten‑year payout rule. The law required that inherited IRAs be fully distributed by the tenth anniversary of the original owner’s death.

However, the statute left open whether annual RMDs were required during the ten‑year window. Initial IRS guidance suggested that no annual distributions were needed until the final year, but advisors cautioned that the issue remained unsettled. The final regulations, released in mid‑2024 and effective for deaths after 2023, resolve this ambiguity. For most non‑spouse beneficiaries who are subject to the ten‑year rule, annual RMDs are now mandatory in years 1–9, with the entire account cleared out by the end of year 10. Only a limited class of eligible designated beneficiaries—such as surviving spouses, minor children (until majority), the disabled or chronically ill, and beneficiaries less than ten years younger than the decedent—may still stretch distributions over life expectancy.

Trusts as IRA Beneficiaries: The See‑Through Requirement

Many people name a trust as the beneficiary of their retirement account to provide asset protection, professional management or support for minor or disabled heirs. Under the new rules, only see‑through trusts (sometimes called “look‑through” trusts) are treated as designated beneficiaries and allowed to use the ten‑year rule. A see‑through trust must meet four tests:

1. Validity and irrevocability. The trust must be valid under state law and become irrevocable upon the death of the account owner.

2. Identifiable beneficiaries. All beneficiaries must be clearly identifiable and individuals; ambiguous classes such as “heirs” or “issue” can cause disqualification if they include non‑person entities.

3. Documentation. A copy of the trust (or a qualifying list of beneficiaries) must be provided to the IRA custodian no later than October 31 of the year following death.

4. No phantom beneficiaries. Certain powers, such as the ability of a charity or estate to receive the IRA assets after other beneficiaries die, may prevent the trust from being treated as a see‑through trust because they introduce non‑individual recipients.

If these requirements are not met, the trust is considered a non‑designated beneficiary, and the IRA must usually be paid out within five years of the owner’s death (if the owner dies before their required beginning date) or over the remaining life expectancy of the decedent (if after the required beginning date). This accelerated timeline can lead to substantial income taxes for heirs and undermines the purpose of using a trust.

Conduit vs. Accumulation Trusts

See‑through trusts fall into two broad categories, each with its own RMD implications:

Conduit Trusts

A conduit trust requires the trustee to distribute all IRA withdrawals immediately to the trust’s beneficiary. Under the final regulations, conduit trusts offer the cleanest path to applying the ten‑year rule. The trust itself does not retain any distributions, and the beneficiary is taxed as if they inherited the IRA outright.

Conduit trusts are often preferred when the beneficiary is responsible and the goal is to maximize tax deferral. Because the trust passes all distributions directly, the annual RMDs (and any additional voluntary withdrawals) flow to the beneficiary. The trustee has little discretion, however, and cannot hold back funds for creditor protection or long‑term planning. If the beneficiary is a minor child, the conduit structure preserves the child’s ability to stretch RMDs until reaching the age of majority, when the ten‑year rule begins.

Accumulation Trusts

An accumulation trust, by contrast, gives the trustee discretion to retain distributions within the trust rather than paying them out. This can provide asset protection and professional management but complicates RMD calculations. The final regulations still allow accumulation trusts to qualify as see‑through trusts, but because the trust itself is taxed at higher rates and because retained income may be subject to different payout schedules, careful planning is critical.

In an accumulation trust, the trustee must take the annual RMD from the IRA but may accumulate those funds inside the trust. The retained distributions are taxed at the trust’s compressed income tax brackets, which reach the highest marginal rate at relatively low income levels. Still, accumulation trusts can be advantageous when beneficiaries are minors, have special needs, or face creditor issues. Trustees must balance tax costs against the benefits of asset protection and long‑term management.

Identifying Eligible Designated Beneficiaries

The final regulations clarify which beneficiaries fall into the special class of eligible designated beneficiaries (EDBs) eligible for life‑expectancy payouts, and how trusts serving them should be drafted. The main categories are:

• Surviving spouses. A spouse may roll the inherited IRA into their own IRA, treat it as an inherited IRA, or—if named in a trust—have the trust treated as a conduit for their benefit. Spouses can delay distributions until age 72 (or 73, depending on the year) and still stretch over life expectancy.

• Minor children of the account owner. A minor child (not grandchildren) may stretch distributions until they reach the age of majority; thereafter, the ten‑year rule applies. Trusts designed for minor children often combine a conduit mechanism during minority with broader discretion later.

• Disabled or chronically ill individuals. Special‑needs trusts often qualify for life‑expectancy payouts when the beneficiary is disabled or chronically ill. Trustees should ensure that the trust terms support government benefit eligibility and comply with strict documentation requirements.

• Beneficiaries not more than ten years younger. Siblings or other relatives close in age can still stretch distributions. Trusts naming such beneficiaries must be drafted to preserve individual identities and avoid inclusion of younger remainder beneficiaries who might disqualify the trust.

If a trust has multiple beneficiaries and one does not qualify as an EDB, the entire trust may lose the life‑expectancy payout unless separate shares are created. Estate planners often structure separate trusts or divide the IRA into separate accounts to preserve favorable treatment.

Practical Steps for Trustees and Drafters

For trustees managing retirement accounts within trusts—and for attorneys drafting estate plans—several practical steps are essential under the new regulations:

1. Audit Existing Trusts and Beneficiary Designations

Many trusts prepared before 2025 assume the stretch rules and use generic beneficiary language. Trustees and estate planners should review and update these documents. Confirm whether the trust qualifies as a see‑through trust; if not, consider whether to amend the trust or adjust beneficiary designations. Remember that designations naming “my estate” or a generic “trust” without specifying a valid see‑through trust can force acceleration of distributions.

2. Provide Documentation to the Custodian

The October 31 deadline to furnish trust documentation (or a list of beneficiaries) is not new, but the final regulations underscore its importance. Trustees must ensure that the IRA custodian receives the necessary paperwork on time to preserve see‑through status. Failure to do so will automatically subject the account to the less favourable payout rules.

3. Choose Conduit or Accumulation Thoughtfully

Selecting between a conduit and an accumulation structure depends on the beneficiary’s circumstances. A conduit trust is straightforward and preserves maximum tax deferral, but it provides no ongoing asset protection. An accumulation trust allows the trustee to retain funds but results in higher trust‑level income taxes and may accelerate the ten‑year payout if the trust is not carefully drafted. Consider mixing structures by establishing separate trusts for different beneficiaries or by using separate IRAs for each beneficiary class.

4. Model Distribution Timelines and Taxes

Because the new RMD rules impose both annual RMDs and a final distribution at year ten, trustees should work with advisers to model the cash‑flow and tax impact over the entire period. For example, a young adult beneficiary might benefit from Roth conversions or accelerated distributions while in a lower tax bracket, whereas a high‑income beneficiary may prefer to defer distributions until later years. Modeling can also identify opportunities to pair IRA distributions with charitable giving or other planning strategies.

5. Coordinate with State Law and Other Trust Terms

State trust law and other provisions—such as spendthrift clauses, distribution standards, and powers of appointment—may affect the trust’s ability to qualify as a see‑through trust. Trustees should ensure that the trust’s discretionary powers do not inadvertently create a non‑individual beneficiary or delay vesting beyond permitted limits. Coordination with state estate and income tax considerations is also crucial, as some states have more favourable rules for trust taxation.

6. Communicate with Beneficiaries

Finally, trustees must communicate clearly with beneficiaries about the new RMD regime. Beneficiaries may be surprised to receive distributions they did not expect or frustrated by accelerated tax bills. By explaining the regulatory changes and demonstrating how the trust structure protects them, trustees can manage expectations and avoid disputes.

Looking Ahead: Planning Beyond 2025

The new RMD rules are part of a broader trend toward encouraging faster turnover of retirement savings. Although the One Big Beautiful Bill Act permanently increased transfer tax exemptions, Congress continues to tinker with retirement and tax policy. Future legislation could further adjust RMD age thresholds, introduce additional exceptions, or change the ten‑year rule itself.

For trustees and estate planners, the takeaway is clear: stay vigilant and proactive. Review beneficiary designations and trust documents regularly. Consider establishing flexible trust structures that can adapt to changes in law, such as granting trust protectors the power to amend trust terms in response to new regulations. Keep detailed records of communications with custodians and beneficiaries, and engage qualified advisors to model tax outcomes.

In the coming years, trust administration will demand a sophisticated understanding of both trust law and retirement account rules. By mastering the new RMD framework and aligning trust structures accordingly, trustees can honor the settlor’s intent, protect beneficiaries and minimize taxes in a rapidly evolving landscape.