How to Handle an IRA in a Trust Without Costly Mistakes
An Individual Retirement Account (IRA) is often one of the largest and most tax-sensitive assets in an estate. That’s why many Kansas families ask, “Can I put my IRA in a trust?”
The short answer is: No— An IRA cannot be owned by a trust. However, this changes when the IRA is inherited.
An IRA must always be owned by an individual. However, you can name a trust as the beneficiary of your IRA after your death—if it’s done correctly.
Handled properly, this strategy can protect beneficiaries, avoid probate, and preserve long-term control. Handled incorrectly, it can trigger immediate taxation, penalties, and lost retirement value.
Done wrong, it can trigger immediate taxes, penalties, and lost retirement value.
In this guide, we’ll explain:
Why IRAs are so tricky to handle in a trust
What Kansas families need to know
The difference between naming a trust as beneficiary vs. owner
When using a trust makes sense (and when it doesn’t)
How a Kansas estate planning attorney can help
Why IRAs Are Different Than Other Assets
Unlike a house or bank account, an IRA is a tax-deferred retirement account. This means:
The money has not yet been taxed
Withdrawals (distributions) are taxed as income
IRS rules control when, how, and by whom distributions must be taken
If you attempt to transfer or “place” an IRA into a trust during your lifetime, the IRS will treat it as a complete withdrawal. That triggers:
Immediate income tax on the entire account
Loss of tax-deferred growth
Early withdrawal penalties if under age 59½
Bottom line: You should never retitle or transfer an IRA into a trust during your lifetime.
Instead, work with your attorney to name the trust as a beneficiary—so the trust receives the IRA after you pass away.
Can I Name a Trust as an IRA Beneficiary in Kansas?
Yes— You can name a trust as the beneficiary of your IRA, and in certain circumstances, this can be a powerful planning tool—especially for:
Minor children or young adults
Beneficiaries with disabilities
Individuals with poor money management skills
Second marriages or blended families
Protecting inheritances from creditors or lawsuits
Rather than leaving the IRA outright, you can name a see-through trust as the beneficiary.
What’s a See-Through Trust?
A conduit trust (also called a “look-through trust” or a “see-through trust”) allows the IRS to “see through” the trust to the underlying human beneficiaries. This lets the trust:
Stretch the IRA distributions over the beneficiary’s life expectancy (for certain categories)
Avoid immediate taxation
Preserve control and protection
To qualify, the trust must:
Be valid under state law
Be irrevocable at death
Have identifiable individual beneficiaries
Provide the trust document to the plan administrator by October 31 of the year following the IRA owner’s death
This is something a qualified asset protection attorney in Kansas can set up properly.
The SECURE Act Changed the Rules
The SECURE Act, passed in 2020, made significant changes to how inherited IRAs are treated:
Most beneficiaries must now withdraw the entire IRA within 10 years.
The “stretch IRA” is now limited to certain people:
Surviving spouses
Minor children (until they reach majority)
Disabled or chronically ill individuals
Beneficiaries less than 10 years younger than the deceased
This makes it even more important to plan carefully if you’re considering a trust for IRA assets.
When Naming a Trust for an IRA Makes Sense
Here are some common examples where placing an IRA in trust (as a beneficiary) is the right move:
To Protect a Child With Special Needs
Leaving an IRA outright could disqualify them from Medicaid or disability benefits. A properly structured trust protects both the benefits and the inheritance.
Learn more about Medicaid planning and special needs trusts.
To Prevent Overspending
If a beneficiary might waste or mismanage their inheritance, a trust can control how much they receive and when.
To Protect from Divorce or Creditors
A trust keeps the inherited IRA separate from a spouse or legal dispute, adding a layer of legal protection.
To Equalize Inheritances
If one child receives a home and another receives an IRA, using a trust helps maintain balance and control the terms.
Using an Accumulation Trust as the IRA Beneficiary
When naming a trust as the beneficiary of an IRA, one key design choice is whether it will be a conduit trust or an accumulation trust. Both can qualify as see-through trusts, but they differ in how IRA distributions are handled once received by the trust.
An accumulation trust allows the trustee to retain IRA distributions within the trust rather than passing them immediately to the beneficiaries. This offers an added layer of protection and flexibility but comes with specific tax considerations.
Benefits of an Accumulation Trust
Asset Protection: Because distributions can be held inside the trust, those funds remain protected from creditors, lawsuits, divorces, and poor financial decisions by the beneficiaries.
Long-Term Control: The trustee can manage how and when beneficiaries receive funds, aligning distributions with needs, milestones, or responsible behavior.
Flexibility for Multiple Beneficiaries: The trustee can allocate distributions differently among beneficiaries, helping maintain fairness and adapt to changing circumstances.
Integration with Special Needs or Medicaid Planning: For beneficiaries with disabilities, retaining assets in the trust can help preserve eligibility for government programs while still allowing the trustee to supplement care and quality of life.
When an Accumulation Trust Is Appropriate
An accumulation trust is often the right choice when:
Beneficiaries are minors, disabled individuals, or financially inexperienced adults
The goal is to shield inherited assets from outside risks
You want discretionary control over distributions rather than automatic payouts
The estate plan needs to coordinate with special needs or Medicaid protections
However, because income retained in the trust is taxed at higher rates, accumulation trusts must be drafted carefully to balance protection with tax efficiency. A knowledgeable Kansas estate planning attorney can help structure the trust language to maintain see-through status and minimize unnecessary taxation.
IRA Trust Planning and Medicaid in Kansas
Kansas treats IRAs differently than many states, and it’s important to get this right.
Applicant’s IRAs are countable. In Kansas, an IRA owned by the Medicaid applicant is always a countable resource, even if it’s in payout status. There is no exemption simply because required minimum distributions have begun.
Community spouse protection. The spouse's retirement accounts are generally exempt from Medicaid resource limits.
Planning note: Because IRAs can’t be owned by a trust without liquidation, the best approach is to leave ownership in the individual’s name and name a properly drafted see-through trust (such as a conduit or accumulation trust) as the beneficiary for protection after death.
Bottom line: In Kansas, applicant-owned IRAs count toward Medicaid eligibility; only the community spouse’s retirement assets are protected.
That’s why families often work with Medicaid planning attorneys to coordinate IRA strategies with long-term care goals.
How an Attorney Can Help
An experienced Kansas estate planning attorney will help you:
Analyze your retirement assets
Identify your goals and beneficiaries
Determine if a conduit trust or accumulation trust is better
Draft compliant trust language to protect tax advantages
Coordinate with financial advisors or CPAs
At Advanced Legal Planning, we take a team-based approach to protect your legacy from every angle.
Watch Real Family Examples
Want to see how real Kansas families handled these complex issues?
Visit our Story Time page for video stories that make legal planning relatable and real.
Take the Next Step
Don’t leave your IRA—and your family’s financial future—to chance. Whether you’re just getting started or reviewing your current estate plan, we’re here to help.
Call (316) 252-2233 or schedule a free consultation to speak with an experienced estate and Medicaid attorney today.
