Planning under SECURE 2.0 for Beneficiary Designation to Trust for Spouse

For married persons, this article addresses federal income and estate tax rules and planning techniques governing IRA beneficiary designations that name trusts as beneficiaries, focusing in particular on provisions for the surviving spouse in the context of credit shelter/marital deduction planning. These rules changed substantially in recent years, first by legislation known as “SECURE 1.0” in 2019, and then amended by “SECURE 2.0” in 2022, and by the final regulations issued in 2024 in Treas. Reg. § 1.401(a)(9). These rules are inordinately complex, affected by many different factual scenarios, the basic formats of which are reviewed below. Many similar planning issues and opportunities are presented in planning for employer-sponsored qualified retirements plans – notably, 401(k) plans and the like – but those plans often contain limitations on flexibility which may foreclose trust strategy options for beneficiary designations and generally are not discussed in this article.  Read more.

By: John P. Barrie, Charles B. Baron, Hollis F. Russell and Barbara A. Sloan are partners at McLaughlin & Stern.