Several of my clients have come to me already having done their estate planning. They saved for retirement, signed their trust, and named beneficiaries in order to protect the people they loved.
That work matters.
But they sit across from me with a plan they created years ago, and it no longer is the right fit for the current law.
If you’re like them, your IRA has become one of your largest assets, and you believe it will pass to your children with the protection you intended.
But when I ask to see the beneficiary form for that IRA, I see that a trust is named.
If you’re like these clients, you may have named your trust as the beneficiary. You probably made that choice to create security, not a tax problem. But maybe no one has reviewed it since the SECURE Act changed inherited retirement account rules, and so sthe trust tax rates your family faces may now produce a result you never intended.
In 2026, trust tax rates reach the 37% federal marginal income tax bracket once taxable income exceeds $16,000. Compare that with a single individual, who does not enter that bracket until taxable income exceeds $640,600.
Those numbers get attention, but they fail to answer the most important question: What do you want this wealth to make possible for the people you love?
The SECURE Act Changed the Rules for IRA Trusts After Families Created Their Plans
The original SECURE Act, enacted in 2019, created the 10-year distribution framework discussed here. SECURE 2.0 later changed other retirement-account rules, but it did not create this central inherited-IRA rule.
Before 2020, the person who inherited your IRA could often spread withdrawals over a lifetime. The SECURE Act replaced that option with a 10-year distribution period for most non-spouse beneficiaries.
Depending on whether you had already started taking required distributions, the person who inherits your IRA may also have to withdraw money every year during that period, not simply empty the account at the end. Different rules apply to certain people, including your surviving spouse, qualifying minor child, beneficiary with a disability or a cronic illness, or someone close to you in age.
Traditional IRA withdrawals generally create taxable income. If your beneficiary has to compress those withdrawals into 10 years, the extra income can land during peak earning years, on top of salary, business income, or investments.
When your trust is the beneficiary, another set of questions arises. I need to know what your trust requires, whether it can retain distributions, who will receive them, and how each choice serves the future you want for your family.
Whether the trust receives distributions for five years, 10 years, or another period depends on how the trust is drafted and who counts as its beneficiary under the retirement-account rules. A qualifying see-through trust may receive the beneficiary-based rules, including the 10-year rule for many beneficiaries. If the trust does not qualify and you die before your required beginning date, the five-year rule may apply. If you die on or after that date, a different remaining-life-expectancy rule may apply.
That is why I need to review the trust terms, the people behind the trust, and your required-distribution status together.
The bottom line: The law changed the environment your plan must work within.
The $16,000 Number is a Warning, Not an Instruction
The One Big Beautiful Bill did not create the compressed trust tax rates. It made the existing individual, estate, and trust rate structure permanent. After applying the 2026 inflation adjustments, estates and trusts enter the 37% marginal federal income-tax bracket once taxable income exceeds $16,000.
For 2026, the federal income tax brackets for estates and trusts are:
- 10% on the first $3,300;
- 24% from $3,300 to $11,700;
- 35% from $11,700 to $16,000;
- and 37% on taxable income over $16,000.
These are marginal brackets, so the entire $16,000 is not taxed at 37%. Still, a trust reaches the highest bracket with far less taxable income than an individual.
Now picture the person behind the tax return. Your daughter may be in the middle of a divorce. Your son may own a business backed by personal guarantees. A child may be recovering from addiction or may not be ready to receive six figures outright.
In those circumstances, forcing every IRA distribution out of the trust to reduce the tax rate can expose the inheritance to the exact danger you were trying to prevent. Tax efficiency matters, but it is one part of the decision.
The bottom line: Trust tax rates tell you what to examine. They do not tell you what to do.
The Beneficiary Form Must Tell the Same Story as the Plan
Your IRA generally passes according to its beneficiary designation, not the instructions in your will. You can have excellent documents in a binder while one old form sends one of your largest assets somewhere else.
I have seen forms that still name a former spouse, name an adult child outright when the current plan calls for protection, or point to a trust that was later amended. Even when the names match, the trust tax rates and distribution provisions may no longer support what you want for your family under current law.
This is the gap I close. I review the beneficiary form beside the trust, the retirement account, the family’s other assets, and the circumstances of the people who will inherit. I also coordinate with the CPA, financial advisor, and insurance professional so each person is working from the same picture.
The bottom line: A beneficiary form is not a separate task. It is part of a complete plan.
Stewardship Starts Before the Money Transfers
Parents often tell me they want to protect an inheritance without controlling their children from the grave. That is a wise distinction. Protection should give the next generation a stronger foundation, not prevent them from growing into capable decision-makers.
So I ask questions that do not appear on an IRA form:
- Do your children understand why you built this wealth?
- Do they know why some assets will remain in trust?
- Have you chosen a trustee who understands both the legal responsibility and the person whose life each decision will affect?
A trust can protect money. A relationship-based planning process can also prepare people, preserve family knowledge, and give the next generation someone to call when a decision becomes real.
The bottom line: Protecting an inheritance and preparing the people who receive it are two different jobs. A good plan does both.
The Plan Needs a Person Who Holds the Whole Picture
The plan that fit five years ago may not fit now. The IRA may have doubled, a child may have married, a business may have taken on new debt, or the person named as trustee may no longer be right for the role. If you come to me before the law or your life changes, we can review those shifts while you still have choices. That is the upstream value of an ongoing relationship with a Personal Family Lawyer® firm.
The value continues in the moment. When you die and your family is grieving, they should not have to introduce themselves to a stranger, locate every account alone, and guess which advisor to call first. Because you have an ongoing relationship, your family has someone who already knows your plan, your people, and what your wealth was meant to do.
The bottom line: The relationship is what keeps the plan connected to real life.
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 you sign the documents. When something happens, your family knows to call me.
Schedule a discovery call with our office. We will review your trust, your IRA beneficiary designations, and how current trust tax rates affect your family’s plan.
This article is a service of Debbie Babb Law, a Personal Family Lawyer® Firm. We do not just draft documents.
We help you make informed and empowered decisions about life and death, for yourself and the people you love. That is why we offer a Life & Legacy Planning® Session, during which you can become more financially organized and make thoughtful decisions for the people who matter most.
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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