A see-through trust is a trust named as the beneficiary of a retirement account that is drafted to meet four specific IRS requirements, so that the IRS will “look through” the trust and treat the individual beneficiaries behind it as if they had inherited the account directly. Without that status, the trust itself is treated as the beneficiary, which triggers a much faster payout timeline and a bigger tax bill. These trusts are sometimes called look-through trusts, and they became considerably more complicated after the SECURE Act rewrote inherited retirement account rules in 2020 and the IRS finalized implementing regulations that took full effect in 2025.
Why Use a Trust at All
Naming a person directly on the beneficiary form is simpler and cheaper. A trust adds drafting fees, an annual tax return, and ongoing administration, so it needs to earn its place.
A few situations usually justify the extra layer. A minor child can’t manage an inherited IRA, and a trustee can hold and invest the account until the child reaches an age the account owner is comfortable with. A beneficiary with a spending problem or exposure to creditors is better protected when the money sits inside a trust than when it lands in their own name. And an account owner who wants distributions tied to milestones, rather than handed over in a single payout, can write those conditions into a trust.
If none of those concerns apply, a direct beneficiary designation often accomplishes the same goal without the overhead.
The Four Requirements for See-Through Status
Treasury regulations list four conditions. Miss any one of them and the IRS ignores the individual beneficiaries entirely.1Internal Revenue Service. Private Letter Ruling 1320021
- The trust must be valid under the law of the state where it was created.
- The trust must be irrevocable, or must become irrevocable at the account owner’s death. Most see-through trusts stay revocable during the owner’s lifetime and lock down at death.
- Every beneficiary who could potentially receive distributions must be an identifiable individual.
- The trustee must deliver documentation to the IRA custodian by October 31 of the year after the account owner’s death. That can be either a full copy of the trust or a list of beneficiaries (including contingent beneficiaries) detailed enough to identify who qualifies. The plan administrator picks which form it will accept.2eCFR. 26 CFR 1.401(a)(9)-4 – Determination of the Designated Beneficiary3Internal Revenue Service. Internal Revenue Bulletin 2024-33
The identifiable-individual rule is where trusts fail most often. If the document names a charity, the account owner’s estate, or any other non-individual anywhere in the chain of potential beneficiaries, the trust loses see-through status. Even a charitable gift tucked into the remainder provisions can do it.1Internal Revenue Service. Private Letter Ruling 1320021
When a trust fails the test, the IRS treats the retirement account as having no designated beneficiary. If the original owner died before reaching their required beginning date for distributions, the entire account has to come out within five years.4Internal Revenue Service. Retirement Topics – Beneficiary
What Changed After the SECURE Act
Before 2020, most non-spouse beneficiaries could stretch required minimum distributions over their own life expectancy. A young grandchild might take small annual distributions for decades while the rest of the account kept growing tax-deferred. See-through trusts were built around that stretch.
The SECURE Act eliminated it for most non-spouse beneficiaries. For account owners who died in 2020 or later, the full balance generally has to be distributed by the end of the tenth calendar year after death.5Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs A life-expectancy stretch now survives only for a narrow group called eligible designated beneficiaries (EDBs): surviving spouses, the account owner’s own minor children until age 21, disabled or chronically ill individuals, and anyone not more than ten years younger than the account owner.2eCFR. 26 CFR 1.401(a)(9)-4 – Determination of the Designated Beneficiary
See-through trusts still work. They just do a different job than they did before 2020, and a trust drafted for a 30-year stretch behaves very differently when the account must empty in 10.
Conduit Trusts and Accumulation Trusts
See-through trusts come in two forms, and the choice drives both the tax outcome and the amount of asset protection the trust actually delivers.
Conduit Trusts
A conduit trust requires the trustee to pass every retirement account distribution straight through to the beneficiary in the same year it’s received. The trust is a pipe. Because the money never stays inside, only the named beneficiary counts for determining the payout period, and the analysis is simpler.
Distributions get taxed at the beneficiary’s individual rate rather than the trust’s compressed rate, which is a real advantage. But under the 10-year rule, a conduit trust will be empty by year 10, with all the money sitting in the beneficiary’s own hands. If asset protection was the main reason for using a trust, a conduit structure may not deliver much of it anymore.
Accumulation Trusts
An accumulation trust gives the trustee discretion to either distribute retirement proceeds or hold them inside the trust. Money can stay protected inside the trust past the 10-year window.
The cost is tax. Income retained inside the trust is taxed at the trust’s own rates, which are heavily compressed: for 2026, a trust hits the top federal rate of 37% once taxable income clears $16,000, and the 3.8% net investment income tax stacks on top.6Internal Revenue Service. 2026 Form 1041-ES – Estimated Income Tax for Estates and Trusts A single individual doesn’t reach that same bracket until $640,600. Accumulation trusts also require a wider beneficiary analysis, since the IRS looks at both current and remainder beneficiaries, which is where a stray non-individual can destroy see-through status.
Most estate planners today lean toward accumulation trusts for non-EDB beneficiaries, specifically because they preserve protection past year 10. A trustee can soften the tax cost by timing distributions to years when the beneficiary’s own rate is low.
Inherited Roth IRAs sit particularly well inside an accumulation trust. Roth owners are never required to take distributions during their lifetime, so they’re always treated as having died before their required beginning date. A beneficiary under the 10-year rule has no annual RMD obligation on an inherited Roth and can let it grow tax-free until the final year.
The Separate-Shares Drafting Point
When a see-through trust has more than one beneficiary, the default is that the shortest applicable payout period controls the whole trust. If one beneficiary is an EDB entitled to a life-expectancy stretch and another is a healthy adult, the 10-year rule governs everyone.
The 2024 final regulations expanded an exception. If the trust document requires the trust to split into separate shares immediately upon the account owner’s death, each share can run under its own distribution rules.3Internal Revenue Service. Internal Revenue Bulletin 2024-33 A disabled beneficiary’s share can take life-expectancy distributions while a sibling’s share runs the 10-year clock. Without the immediate-split language, the shortest period wins for everyone.
Any see-through trust drafted before these regulations were finalized is worth having an attorney review against the current separate-share requirements.
Annual Distributions During the 10-Year Window
One of the most misunderstood pieces of the current rules is whether a beneficiary under the 10-year rule has to take anything out each year, or can simply empty the account by year 10. It depends on when the original owner died.
If the owner died before their required beginning date (generally April 1 of the year after they turned 73), there’s no annual RMD during the 10-year period. The beneficiary can take out any amount in any year, as long as the account is fully distributed by year 10.
If the owner died on or after their required beginning date, the final regulations require annual distributions throughout the 10-year window, calculated using the beneficiary’s life expectancy, with the balance due by year 10.7Federal Register. Required Minimum Distributions The IRS waived penalties for missed annual RMDs from 2021 through 2024 while the rules were being sorted out.8Internal Revenue Service. Notice 2024-35 – Certain Required Minimum Distributions for 2024 As of 2025, the penalties apply in full.
Missing a required distribution carries a 25% excise tax on the shortfall, reduced to 10% if the beneficiary corrects it within two years.5Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs For a trustee of a see-through trust, the exposure is both personal and real, so this is the detail most worth getting right.
What a See-Through Trust Costs
Drafting is not a DIY project. Attorney fees for a specialized retirement account trust generally run $1,500 to $5,000 or more, with separate-share provisions, special needs language, or multiple sub-trusts pushing the number up.
Then there’s the ongoing cost. Any trust with gross income of $600 or more, or any taxable income at all, has to file a federal Form 1041 fiduciary return.9Internal Revenue Service. 2025 Instructions for Form 1041 and Schedules A, B, G, J, and K-1 Professional preparation typically runs $500 to $4,000 a year depending on complexity, and a professional trustee adds its own fee.
For a modest inherited account passing to a financially responsible adult, these costs can outweigh the benefits. Where a trust earns its keep is in the situations it was designed for: minor children, beneficiaries who need protection from themselves or from creditors, and plans that depend on controlling the timing of distributions long after the account owner is gone.