Answers to Common Questions about Trust-Inherited IRAs: Part 2

February 12, 2021


The Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 changed the distribution options for most IRA beneficiaries. In the first part of this two-part series, we reviewed the requirements for a trust to qualify as see-through, and the available distributions options. Now in this second and final part, we will cover questions about “ghost” life expectancy, as well as the taxation or distributions.


What is a “ghost life-expectancy” distribution option, and how does a trust get one?

When a traditional IRA account owner dies after their required beginning date (RBD), a trust that does not meet the see-through trust rules has the option of continuing the deceased owner’s remaining life expectancy.


How are the distributions from an IRA left to a trust taxed?

It depends. First, let’s assume the only asset the trust has is the IRA distribution. The IRA distribution is paid to the trust and is considered income to the trust. If the trust distributes the income to a beneficiary, the income is included in the beneficiary’s income and taxed at his/her rate. If the trust can accumulate income, then any income that remains in the trust is taxed at the trust tax rates. Assuming they are qualified, Roth IRA distributions are tax-free.

The trust tax rates have compressed tax brackets. This means income retained by the trust in excess of $12,950 will be taxed at the maximum rate of 37%. Assuming they are qualified, Roth IRA distributions are tax-free, except to the extent interest is credited from the cash account in the trust.


Estates and Trusts


What else am I missing?

As this Q & A explains, it is complex when the beneficiary of an IRA is a trust. If a special-needs child, someone compromised by addiction or with creditor problems, or a similar issue is involved, a trust most likely makes sense. It will protect the beneficiary in many other cases; the only concern is that the beneficiary will not have immediate access to all the funds. Other options, such as predetermined beneficiary payout option may allow for a distribution over time and be easier to manage. As this is a complicated area, always remember to consult your tax and legal professionals before making any decisions.



This material is educational and intended for an audience with financial services knowledge.


For more information on retirement-planning strategies, please contact the Retirement Strategies Group at (800) 722-2333, or email us at



Picture of Pacific Life Annuities

Pacific Life offers a broad and diversified range of products and solutions designed to help individuals and families achieve asset growth, sustainable retirement income, and long-term financial independence. We also help businesses manage and fulfill their long-term retirement plan commitments to employees.

Pacific Life, its distributors, and respective representatives do not provide tax, accounting, or legal advice. Any taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax advisor or attorney.

Pacific Life is a product provider. It is not a fiduciary and therefore does not give advice or make recommendations regarding insurance or investment products.

Pacific Life refers to Pacific Life Insurance Company and its affiliates, including Pacific Life & Annuity Company. Insurance products are issued by Pacific Life Insurance Company in all states except New York and in New York by Pacific Life & Annuity Company. Product availability and features may vary by state. Each insurance company is solely responsible for the financial obligations accruing under the products it issues. 

Variable insurance products are distributed by Pacific Select Distributors, LLC (member FINRA & SIPC), a subsidiary of Pacific Life Insurance Company (Newport Beach, CA) and an affiliate of Pacific Life & Annuity Company. Variable and fixed annuity products are available through licensed third parties.

No bank guarantee • Not a deposit • Not FDIC/NCUA insured • May lose value • Not insured by any federal government agency

For financial professional use only. Not for use with the public.