DEFINITION of 'See-Through Trust'

A trust that is treated as the beneficiary of an individual retirement account. See-through trusts use the life expectancies of the beneficiaries of the trust in determining the required minimum distributions (RMD) that have to occur after the death of the retirement account holder.

Individual retirement account (IRA) owners are able to choose who will be a beneficiary of the account when the owner becomes deceased. Federal laws prohibit accounts from continuing on indefinitely after the original owner’s death, and required minimum distributions (RMDs) push the account toward liquidation over a period of time. In general, it is difficult to stretch the period of time in which the RMDs can be made over, though investors can create trusts that can be treated as beneficiaries. This is called a see-through trust.

BREAKING DOWN 'See-Through Trust'

In order to set up a trust as a designated beneficiary of a retirement account, several requirements must be passed. The trust must be considered valid and legal under state law, which typically relies on the trust being written, witnessed, and notarized. The trust must be an irrevocable trust, specifically on the death of the owner of the IRA. This means that the beneficiaries can be changed up to the point of the IRA owner’s death, but not afterward.

The beneficiaries of the trust must be considered eligible and named, with non-living entities or charities not being able to qualify because they do not have a life expectancy. The age of the oldest beneficiary of the trust is used to calculate the RMD.

Documentation of the see-through trust must be provided to the custodian of the IRA by October 31st of the year following the IRA owner’s death. The regulations governing the trust and how it relates to the distribution of the IRA are part of 26 Code of Federal Regulations Section 1.401(a)(9).

RELATED TERMS
  1. Blind Trust

    A trust in which the executors have full discretion over the ...
  2. Beneficiary Of Trust

    A beneficiary of trust is a person for whom a trust was created, ...
  3. Beneficiary

    Anybody who gains an advantage and/or profits from something. ...
  4. Charitable Lead Trust

    A trust designed to reduce beneficiaries' taxable income by first ...
  5. Trust Fund

    A trust fund is a fund comprised of a variety of assets intended ...
  6. Inherited IRA

    An individual retirement account that is left to a beneficiary ...
Related Articles
  1. Financial Advisor

    Why You Need to Find the Right IRA Beneficiary

    It definitely matters who you pick as your IRA beneficiary—and how you go about it. And in some cases, your best option may be to go with a trust.
  2. Retirement

    Designating A Trust As Retirement Beneficiary

    Designating a trust as your IRA beneficiary can be beneficial, but it requires proper planning to avoid problems.
  3. Financial Advisor

    Passing an IRA to a Trust: The Good and Bad

    Creating a trust is a common estate planning tactic, but naming a beneficiary to an IRA to a trust may have unintended consequences.
  4. Managing Wealth

    Which Retirement Plans Need a Family Trust?

    Many people think family trusts are only for the very wealthy, but if your retirement assets exceed $500,000, you may want to consider the option.
  5. Retirement

    How To Set Up A Trust Fund In The U.K.

    A guide to the whys and wherefores of setting up this most versatile of estate-planning instruments in the United Kingdom.
  6. Managing Wealth

    Surprising Ways a Trust Could Help Your Family

    Everything you always wanted to know about setting up trusts, in handy glossary form.
  7. Retirement

    How To Set Up A Trust Fund In Australia

    No, they're not just for the super-rich. But you need to know the rules.
  8. Retirement

    3 Deadlines For Retirement Plan Beneficiaries

    To take full advantage of new RMD regulations, beneficiaries need to take action before important deadlines.
  9. Managing Wealth

    Pick The Perfect Trust

    Trusts are an estate plan's anchor, but the terminology can be confusing. We cut through the clutter.
  10. Managing Wealth

    What's a Trust?

    A trust is a fiduciary relationship in which one party gives another party the right to hold property or assets on behalf of a beneficiary.
RELATED FAQS
  1. Can I put my IRA in a trust?

    Learn the proper way to transfer ownership of your IRA to a trust. Consider how naming the trust as a beneficiary affects ... Read Answer >>
  2. What are the keys to setting up a trust fund?

    Setting up a trust to secure your assets for a beneficiary allows you to set the terms under which the beneficiaries are ... Read Answer >>
  3. What are the requirements that a trust needs to meet to be qualified?

    The requirements that a trust must meet to be qualified are as follows: The trust must be a valid trust under state law or ... Read Answer >>
  4. What are the pros/cons of naming a trust as the beneficiary of a retirement account?

    This has been the topic of an ongoing debate in the financial community between estate planning attorneys and financial advisors. ... Read Answer >>
Hot Definitions
  1. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  2. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  3. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  4. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
  5. Job Market

    A market in which employers search for employees and employees search for jobs. The job market is not a physical place as ...
  6. Yuppie

    Yuppie is a slang term denoting the market segment of young urban professionals. A yuppie is often characterized by youth, ...
Trading Center