Protect Your IRA with a Trust

Sabine Franco
Jul 16
4 min read

When it comes to IRA trust planning, most people don’t realize that their retirement accounts don’t pass through their will. Instead, your IRA goes straight to the people listed on your beneficiary form — not necessarily the people you intended, and not necessarily with any protections in place.

And unless you’ve taken extra steps, whoever inherits that account has full control. That means they can spend it, cash it out early (and pay the taxes), or even lose it in a divorce or lawsuit. If that makes you pause, you’re not alone.

This is why many families — especially those with more than $150,000 in retirement savings — are turning to IRA Trusts as part of their estate plan. And if that’s you, I want you to understand exactly how these trusts work and whether they’re the right fit for your family.

Let’s break it down.

1 | Protecting Your IRA from Creditors, Lawsuits & Divorce

While your IRA is generally protected while you're alive, that protection can vanish when your heirs inherit it. If the account is cashed out or mismanaged, the money can become vulnerable to lawsuits, creditors, or divorce proceedings.

An IRA Trust keeps those funds in a protected structure, meaning they can’t be touched as long as they remain in the trust. This is especially powerful if you have children from a previous marriage or want to make sure your current spouse is supported — without giving them full control to redirect those funds later on.

2 | Guarding Against Bad Money Habits

Maybe your heir isn’t great with money — or they’re just too young to handle a large inheritance. One of the smartest moves you can make is to build in guidance and limits through an IRA Trust.

With the right setup, you decide how much is distributed and when. Want your child to finish college first? You can include that. Want the funds used only for a first home or medical expenses? Done. This isn’t one-size-fits-all. We work with you to tailor the trust to your family’s needs.

3 | Tax Benefits That Could Last for Decades

An inherited IRA cashed out in full could trigger a huge tax bill in a single year. And the kicker? It also eliminates the long-term tax-deferred or tax-free growth you worked hard to build.

But with IRA trust planning, we can structure things so your beneficiary stretches out those distributions over time — which could mean years or even decades of continued growth without the tax hit.

4 | What If You’re Naming a Minor?

Minors can’t legally inherit an IRA, which means the court will appoint someone to manage it unless you’ve already put a plan in place. That’s not a risk I recommend taking.

An IRA Trust lets you name a trusted adult to manage the account until your child reaches a responsible age — and even then, you can choose to keep some protections in place to make sure the money is used wisely.

Is an IRA Trust Right for You?

This kind of planning isn’t for everyone. The benefits depend on your family dynamics, your goals, and even your state laws. But if you have more than $150,000 in retirement accounts and want to protect what you’ve built, it’s worth a serious look.

Let’s talk about it. Schedule a call and we’ll walk through whether this makes sense for your legacy.

FAQ: IRA Trust Planning

Q1: Can I name a trust as the beneficiary of my IRA?

Yes, but it must be a properly drafted trust that meets specific IRS requirements. A generic revocable trust won’t do. You’ll need to create an IRA Trust that qualifies as a “see-through” trust to preserve tax advantages.

Q2: What happens if I don’t set up an IRA Trust?

Your IRA will go directly to the beneficiary you named, with no guardrails. That person can withdraw the funds at any time, which could lead to poor financial decisions or unnecessary taxes.

Q3: How has the SECURE Act 2.0 affected IRA Trust planning in 2025?

SECURE Act 2.0, which continues rolling out in 2025, places new limits on how long inherited IRAs can grow tax-deferred—typically requiring full distribution within 10 years. However, IRA Trusts still offer strategic control, protection, and in some cases (such as for minors or disabled beneficiaries), the potential for longer “stretch” benefits. In today’s legal landscape, having a trust in place gives you more flexibility and peace of mind.

This article is a service of The Ambitious Legacy Firm. We do not 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 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 using the link below to schedule a call with our Client Services Director, who will be able to guide you on scheduling your Legacy Planning Session.

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