The Mechanics: How an IRA Transfers After Death

Retirement accounts move differently from almost everything else in your estate. Wills do not control IRAs. Trusts do not automatically control IRAs. The form you signed with Fidelity, Schwab, Vanguard, or your local credit union — the beneficiary designation form — controls.

When you die, whatever name sits on that form receives the IRA, period. If you named your living trust as primary beneficiary, here is what happens next:

1. The trust becomes the owner. The IRA is retitled as an inherited IRA in the trust's name.
2. Your successor trustee takes charge. They present the trust documents to the custodian and provide the IRS-required information.
3. The 10-year payout rule applies. Under the SECURE Act (and its SECURE 2.0 refinements), most non-spouse beneficiaries — including a trust — must drain the inherited IRA within ten years of the original owner's death.
4. The trustee distributes funds to your human beneficiaries under the terms of your trust agreement — at the ages, in the percentages, and under the conditions you wrote in.

That structure can be a gift to your family. It can also be a tax disaster. Which one depends on who your beneficiaries are and how your trust is drafted.

When Naming Your Living Trust IS the Right Call

A trust-as-beneficiary structure earns its keep when control matters more than tax efficiency.

Minor children. Florida law (Fla. Stat. § 744.387) tightly limits direct distributions to minors. A child under 18 who inherits an IRA outright triggers a guardianship, and the funds then become accessible at age 18 with no further restriction. A properly drafted trust keeps the distributions on your schedule — staggered at 25, 30, and 35, or held until a specific milestone.

A beneficiary you would not hand cash to. Substance abuse, immaturity, an unstable marriage, or known creditor exposure — facts of life that a trust can manage and a beneficiary designation form cannot.

Special-needs beneficiaries. A child or sibling receiving SSI, Medicaid, or other means-tested benefits will typically lose those benefits the moment they inherit a large IRA outright. A properly drafted special-needs trust named as IRA beneficiary keeps the inheritance from disqualifying them.

Blended families. A surviving spouse named directly as IRA beneficiary can — and often does — redirect the account to their own children rather than yours. A trust solves this by giving the surviving spouse income for life while preserving the remainder for your children from a prior marriage.

When Naming Your Living Trust Is Usually the Wrong Call

The default rule for married couples in Florida is that the surviving spouse should be the primary IRA beneficiary — directly, in their own name. Three problems show up when you put a trust in that slot instead.

You forfeit the spousal rollover. A surviving spouse who inherits an IRA directly can perform a spousal rollover: they treat the IRA as their own, restart the required minimum distribution clock based on their own age, and stretch the tax-deferred growth across the rest of their life. A trust-as-beneficiary structure forfeits that rollover in nearly every case. Decades of tax deferral compress into the 10-year SECURE Act window.

Trust income tax brackets are brutal. Income retained inside a trust hits the top federal bracket at roughly $15,650 of retained income in 2026. The same income distributed to a human beneficiary is taxed at the human's bracket — often dramatically lower. A trustee who retains IRA distributions inside the trust hands the IRS a much larger share than necessary.

See-through trust drafting is unforgiving. For the trust to qualify for any of the inherited-IRA payout treatment available under SECURE, the trust must meet four specific IRS requirements, and the trustee must furnish documentation to the IRA custodian by September 30 of the year following the original owner's death. Miss the deadline or the documentation and the trust is treated as a non-qualified beneficiary — the entire IRA accelerates into the year of death and gets taxed at the trust's highest rate, all at once.

A Florida-Specific Wrinkle Most People Miss

Fla. Stat. § 222.21 gives Florida residents one of the strongest IRA creditor exemptions in the country. Florida courts have read the statute broadly enough to extend its protection to inherited IRAs owned by a Florida resident — even though the U.S. Supreme Court reached the opposite conclusion on the federal bankruptcy exemption in Clark v. Rameker.

The practical effect: a competent adult Florida beneficiary inheriting an IRA directly already enjoys substantial creditor protection. If your only concern was creditor protection and your beneficiary is a Florida adult, the trust solution may be solving a problem Florida statute already solved.

The doctrine varies materially state-by-state. An IRA inherited by a beneficiary in California or New York looks very different from one inherited by a beneficiary in Orlando or Tampa. If your family is spread across multiple states, the analysis gets harder, not easier.

Frequently Asked Questions

Q: Can I name my living trust as a contingent beneficiary instead of primary?

A: Yes — and for many Florida families this is the cleanest structure. Name your spouse as primary beneficiary, then name your living trust as contingent. The spouse keeps the rollover option if they survive you; the trust catches the IRA if they predecease you.

Q: Does my trust need special language to receive an IRA?

A: Yes. Most off-the-shelf living trusts do not contain the "see-through" provisions required by the IRS. A trust intended to receive an IRA needs explicit "conduit" or "accumulation" language, depending on whether you want the IRA to flow through to beneficiaries immediately or stay inside the trust longer.

Q: What if I have multiple IRAs?

A: Each IRA carries its own beneficiary designation form. You can name different beneficiaries for different IRAs — the rollover IRA goes to your spouse, the Roth goes to the children's trust. The forms are independent, but the strategy should be coordinated.

Q: Do Roth IRAs follow the same rules?

A: The SECURE Act 10-year rule applies to Roth IRAs too, but the tax consequence is very different because Roth distributions are generally tax-free. Trust-as-Roth-beneficiary structures are often more attractive than trust-as-Traditional-IRA structures for exactly that reason.

What to Do This Week

If you have a Florida living trust and you have not reviewed your IRA beneficiary designation in the last five years — or you have not reviewed it since a divorce, remarriage, birth, death, or significant change in your beneficiaries' lives — pull the forms.

Log into each IRA custodian's portal. Print the current beneficiary designation. Bring it to your estate planning attorney along with your trust agreement. Ask the question plainly: given my current family, my current tax exposure, and the current state of my trust drafting, does this designation still make sense?

That conversation costs less than a tank of gas. The mistake on the form, if there is one, can cost six or seven figures.

Talk to a Florida Estate Planning Attorney

The IRA beneficiary designation is one of the highest-leverage decisions in your entire estate plan, and it lives on a one-page form most people sign once and never look at again. A Florida estate planning lawyer familiar with both asset protection strategies in Florida and the SECURE Act payout rules can run the analysis specific to your family.

Schedule a complimentary discovery call to review your beneficiary designations alongside your living trust.

This article is for educational purposes only and does not constitute legal advice. Reading this article does not create an attorney-client relationship. Florida law is discussed; out-of-state readers should consult counsel licensed in their home jurisdiction. Aspire Legal Solutions PLLC is licensed in Florida only.