A see-through trust, also known as a "look-through" trust, is a type of trust that can be named as the beneficiary of an IRA. The trust allows certain beneficiaries (but see issues created by the SECURE Act discussed later) of the trust to stretch out the distributions from the IRA over their lifetimes, potentially minimizing taxes and maximizing the tax-deferred growth of the IRA assets. For the trust to qualify as a see-through trust, it must meet certain IRS requirements, including:

When a see-through trust takes a Required Minimum Distribution (RMD) from an IRA, the RMD is typically calculated based on the life expectancy of the oldest beneficiary of the trust (this is again impacted by the SECURE Act.) This is because the IRS requires the use of the oldest beneficiary's life expectancy to determine the distribution period, which generally results in a shorter distribution period and larger RMDs compared to using the life expectancy of a younger beneficiary.

See-through trusts are still allowed even after the changes brought about by the SECURE Act, which significantly altered the stretch IRA rules. The SECURE Act, which was enacted in December 2019, changed the rules for inherited IRAs by generally requiring that most non-spouse beneficiaries deplete the account within 10 years of the account owner's death. This effectively eliminated the ability to stretch distributions over the beneficiary's lifetime for most beneficiaries.

However, see-through trusts can still be used as beneficiaries of IRAs. The key change is how the distributions are handled under the new rules. While the trust can still be named as a beneficiary, the 10-year rule applies, meaning that the IRA must be fully distributed to the trust within 10 years after the original account owner's death. The trust can then distribute the funds to its beneficiaries according to its terms.

There are exceptions to the 10-year rule for certain eligible designated beneficiaries, such as surviving spouses, disabled or chronically ill individuals, minor children of the account owner (until they reach the age of majority), and beneficiaries who are not more than 10 years younger than the deceased account owner. For some of these beneficiaries, the stretch IRA concept may still apply, allowing them to take distributions over their life expectancy.

If the terms of the trust permit, the taxable distributions can be passed through to beneficiaries; thus the beneficiaries will pay the taxes, a better result than the trust paying the taxes at the trust tax rates which hit the higher percentage rates faster than individual rates.

Under the 10-year rule, RMDs are also required until the account is fully distributed. However, until the regulations were issued, the IRS has waived the RMD penalty for distributions under the 10-year rule for years 2021 through 2024.

Being the SECURE Act significantly altered the stretch IRA rules, the purpose of a see-through trust, it may be appropriate to have the trust attorney review the trust for these and other distribution issues.