What Are “See-Through” Trusts?

Estate planning is an important part of the financial picture. Planning for what will happen with your assets after you’ve passed away can set the stage for a comfortable future for your loved ones, even if you are no longer there to provide for them. In the estate planning process, you may come across the term “trust”. You may wonder if trusts are right for your needs, particularly in setting up a trust to place your retirement accounts in. Trusts are a complicated legal area, and leaving your IRA in a trust is not like other financial decisions. In this guide, we will help you to understand the role of trusts in estate planning and how these legal documents can help protect your financial assets well into the future.

What is a Trust?

Most people are familiar with wills, or those legally-binding documents that spell out an individual’s final wishes. Wills are not the only estate planning document available to people, however. A trust is another legal arrangement that is designed to preserve and manage one’s financial assets both in life and after death.

In simple terms, a trust is a fiduciary arrangement that gives a third-party (the “trustee”) the ability to hold financial assets on behalf of a named beneficiary or beneficiaries. A trust is created by an attorney based on the unique needs, wishes, and goals of each client, and there are many types of trusts for different applications. The two most common forms of trust are revocable trusts, which allow the individual (the “grantor”) to retain control of the assets during his or her lifetime, and irrevocable trusts, which takes control away from the grantor once it has been executed, but protects assets from estate taxes and potential legal judgments.

Trusts vs. Wills

There are significant benefits to trusts over wills, which makes them valuable estate planning tools that is gaining favor across the country. A trust allows you to control your assets, spelling out exactly when distributions can be made and to whom those distributions go to. Properly constructed, trusts offer an incredible level of control, even for families with children from different marriages or other complex situations. A trust also helps to protect one’s legacy, shielding assets from creditors or beneficiaries who may not be trustworthy with monetary gifts. Finally, trusts can save money by allowing assets to avoid the lengthy and expensive probate process as well as to shield those assets from certain estate and gift taxes.

The See-Through Trust

Now that we understand the basics of trusts, there is one special form that is critical to the discussion of retirement planning: the “see-through” trust. This is a trust where the trust itself is a named beneficiary of an Individual Retirement Account (IRA). In this form of trust, the life expectancy of the beneficiaries (according to the IRA Single Life Expectancy Table) of the trust are used to calculate required minimum distributions (RMDs) that are required to be taken upon the death of the IRA’s account holder.

There are certain requirements that must be met when setting up a see-through trust. Requirements include:

  • The trust must be valid under applicable state law where the trustee resides.
  • The trust must be set up as irrevocable on the death of the IRA’s owner.
  • Beneficiaries of the trust must be eligible under applicable laws and named specifically in the trust. Beneficiaries can be changed during the lifetime of the IRA owner, but cannot be changed after the owner’s death. It is important to note that non-living beneficiaries, such as charitable organizations, do not qualify, as they do not have a life expectancy (which is used to calculate future RMDs).
  • The trust and its documentation must be provided to the IRA’s custodian by October 31 of the year following the death of the IRA owner.

Specific Requirements and Particulars of the See-Through Trust

Once the above requirements are met, the see-through trust can be used to “stretch” IRA benefits. In other words, a named beneficiary of the trust can use it to extend RMDs – the required post-death distributions from the account – across the named beneficiary’s life expectancy as calculated by the IRS Single Life Expectancy table.

There are several particulars to be aware of when considering a see-through trust as an estate planning tool. First, if the trust qualifies under regulations, the beneficiary of the trust – the IRA itself — is treated as if he or she was named directly in the trust’s documentation. This particular allows for inheritance of the IRA and its distributions to be stretched or extended over the remaining life expectancy of that beneficiary.

One question that arises is if there is more than one beneficiary named in the see-through trust. How does this affect future payments upon the death of the trustee? In cases where there are multiple beneficiaries, and the trust itself is named as the IRA beneficiary, the oldest named beneficiary’s life expectancy is used to calculate the required post-death distributions from the account. Individual named beneficiaries may not use their own life expectancies and are dependent on the oldest individual named in the document.

Again, non-living entities cannot be named for the trust to qualify as see-through. If a non-living entity IS named, the IRA no longer has a designated beneficiary and the distribution “stretch” will be forfeited.


Trusts are a valuable tool to gain and maintain control over an individual’s assets. This tool is not for everyone, however, and an individual must weigh the pros and cons to determine if a trust is right for their specific financial needs. Seeking the assistance and advice of an estate planning attorney is always a good idea; with their guidance, an appropriate trust can be created that provides for a stable and secure financial future for your loved ones, even after you’ve passed away.

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