By the time the waiter asks whether they want another round of iced tea, Susan Carter and Laura Bennett have covered forty-five years of friendship in about ninety minutes.

They were inseparable in high school and stood in each other’s weddings. They have raised children, built careers, lost parents, and reached the stage when retirement was becoming visible without feeling immediate. Both women understood financial responsibility. Neither expected an inherited IRA to change how she thought about her own family legacy.

Over lunch, the conversation turned to their parents. Susan spoke of her inherited IRA as her "pension from Dad," a continuing reminder of his saving and discipline. Laura’s inheritance was equally meaningful, but it came with a deadline. What initially sounded like a small difference in administrative rules had begun to feel like a meaningful difference in control.

Susan’s father died in November 2019, before the SECURE Act took effect. Susan inherited a $1 million traditional IRA under the older life-expectancy rules. She can take the applicable annual required distribution while the remaining account stays invested, and she can consider larger withdrawals when her tax and family circumstances make them attractive.

Laura’s mother died in March 2020, after taking required minimum distributions for several years, and left Laura a $1 million traditional IRA. Because Laura inherited after the SECURE Act took effect, she is subject to its 10-year rule and must fully distribute the inherited IRA by the end of Year 10. Because her mother had already begun taking RMDs, Laura is also subject to annual beneficiary RMD requirements within that period, subject to the IRS transition relief that applied during the early years of the new rules.

Laura still has flexibility in deciding how to manage distributions during the 10-year period, but unlike Susan, she cannot stretch the inherited IRA over her life expectancy.

The contrast was personal, not merely technical. Susan had time to adapt. Laura had a clock. Laura’s inheritance remained valuable, and she could pay the tax and reinvest the proceeds, reduce debt, or strengthen her family’s balance sheet. What she had less of was the ability to wait for a more favorable year or allow the inherited IRA to continue beyond the 10-year window.

The following illustration shows how that difference can matter over time. Susan and Laura each begin with a $1 million inherited traditional IRA. To isolate the effect of the different distribution rules, the illustration assumes the same investment return, tax rate, and reinvestment of all after-tax distributions.

Susan inherited before the SECURE Act became effective and remains subject to the pre-SECURE life-expectancy distribution rules. Laura inherited after the SECURE Act became effective and is subject to the 10-year distribution rule. The illustration therefore compares Susan’s continuing life-expectancy distributions with a systematic distribution strategy for Laura that fully distributes her inherited IRA within the required 10-year period.

Important Technical Notes

Susan’s annual distributions are based on the applicable inherited-IRA life-expectancy rules. Updated IRS life-expectancy tables apply beginning in 2022.

Laura’s illustrated withdrawals are not intended to represent her required minimum distribution each year. They illustrate one systematic approach to distributing the inherited IRA within the SECURE Act’s 10-year period. Because Laura’s mother had already begun taking RMDs, annual beneficiary RMD rules also apply within the 10-year period, subject to applicable IRS transition relief. That relief did not extend the 10-year deadline.

What the Illustration Shows

The principal advantage of the pre-SECURE rules is not simply the difference in illustrated wealth at Year 10. It is time and flexibility. Susan can continue coordinating distributions with her tax situation, retirement income, charitable giving, and changing family circumstances after Laura’s inherited IRA must be fully distributed. Laura retains considerable planning flexibility within her 10-year window, but she cannot extend that window over her remaining life expectancy.

Then the Conversation Changes

As Susan and Laura compared their own experiences, the conversation shifted. Each could see what the other had gained or lost because of timing. Susan had inherited a longer runway. Laura had inherited a firm deadline. That contrast led them to look beyond the accounts they had received and toward the accounts they and their husbands were likely to leave.

Each couple had qualified retirement balances approximately five times the size of the accounts Susan and Laura had inherited. Their children could receive those assets while building careers, raising families, paying mortgages, or running businesses, potentially during some of their highest-earning years. Unlike Susan, they generally would not have a lifetime stretch available.

The women did not leave lunch believing they had found a loophole or a simple answer. They left with a better question: What might this look like for our children, and what choices do we have now? That question sent both couples to their financial advisors for projections that looked beyond their own retirement needs and modeled how today’s qualified balances could move through the family under the SECURE Act.

That is where their legacy-planning conversation begins.

A $1 million traditional IRA is not economically identical to $1 million in a taxable investment account or a residence. The IRA contains an embedded ordinary-income tax liability. It has distribution rules during the owner’s life and beneficiary rules after death. The beneficiary form, not the will, controls who receives the retirement account when a valid designation is on file.

There is no universal dollar definition of a “large” retirement account. The better test is purpose. A balance becomes large when it is likely to exceed what the owners will spend and materially affect the next generation’s taxes, financial choices, protection needs, or inheritance. At that point, the account should be evaluated as a family legacy asset, not only as retirement savings.

The proper starting point is the entire family balance sheet. Traditional retirement accounts, Roth accounts, taxable investments, real estate, life insurance, trusts, charitable intentions, and likely beneficiary tax rates should be evaluated together.

Think Across Four Generations

The SECURE Act did not create one rule for every beneficiary. The result depends on who inherits, whether the beneficiary qualifies for a special category, whether the original owner died before or after the required beginning date, and whether a trust satisfies the see-through requirements.

For most families, the key distinction is straightforward: a typical adult child or grandchild is subject to the ten-year rule, while a surviving spouse and other eligible designated beneficiaries have different options.

A beneficiary who takes only the legal minimum may create a large final-year distribution. A better approach is to project the account for the full period and coordinate withdrawals with expected income, deductions, charitable gifts, business events, state residency, and investment results.

The challenge is not whether the inheritance remains valuable after tax, but how intelligently the beneficiary manages the compressed tax timeline.

The beneficiary structure should follow the family objective. Simplicity can favor an outright inheritance. Oversight during the inherited IRA period can favor a conduit trust. Long-term protection and family stewardship can favor an accumulation trust. These are not competing products. They are different tools, and the right tool is the one that fits the family rather than the default.

Outright Inheritance: Simple and Flexible

The simplest approach is to name an adult child directly as beneficiary. The child inherits the retirement account, directs the investments and distributions, and pays income tax on taxable withdrawals.

This may be the right choice when the child is financially responsible, creditor and marital risks are limited, and the parents value simplicity and flexibility over continued control. But the decision deserves careful consideration because an outright inheritance can close the door on an important planning opportunity.

Before death, a parent can name a properly designed see-through trust as beneficiary of the retirement account and establish that trust for the child’s benefit. Depending on its terms and applicable law, the trust can provide meaningful protection from creditors, divorce, poor financial decisions, and other risks while preserving assets for the child and future generations.

Once a child receives an inheritance outright, many of those planning opportunities become more limited. Transferring personally owned inherited assets into a trust the child creates for his or her own benefit generally does not provide the same creditor protection that may have been available had the parent left those assets in a properly structured trust for the child from the outset.

For families concerned with protection and preservation, the beneficiary decision can therefore be a largely one-time planning opportunity. An outright inheritance may still be appropriate, but the trust alternative should be considered before that opportunity is lost.

Conduit Trust: Oversight With a Shorter Life

A conduit trust can administer the inherited IRA and provide oversight while the account remains intact. Its defining feature is that retirement-account distributions must pass through to or for the beneficiary under the trust terms. Under the old stretch regime, protection could last for decades because the IRA itself could last for decades. Under the SECURE Act, the account may empty much sooner, and protection may end as distributions reach the child.

Accumulation Trust: Protection After the IRA Is Gone

An accumulation trust separates the retirement-account clock from the family-trust clock. The inherited IRA may have to distribute its assets within ten years, but the family trust does not necessarily have to distribute the same money to the child. The trustee may retain after-tax proceeds, invest them, and use them according to the trust’s standards.

This can preserve wealth for a child and later descendants while providing creditor, divorce, and governance protections. The cost is complexity. Trusts reach high federal income-tax brackets quickly, so the trustee and tax advisor may need to decide each year whether taxable income should be retained or distributed. The correct comparison is not simply “trust tax rates are high.” The better question is what incremental tax cost the family is accepting in exchange for protection, control, and multigenerational value.

Families sometimes treat inherited IRA planning as something the children will handle later. That misses the largest opportunity. While the owners are alive, they still control the account’s size and tax character, the beneficiary structure, the charitable allocation, and the coordination of assets across the family balance sheet. They can also equip the surviving spouse, executors, and trustees with options that may be impossible to create after death.

Should the Surviving Spouse Receive Everything?

Naming the surviving spouse is the conventional starting point, and for good reason. A surviving spouse has the broadest retirement-account options and can often continue tax deferral for many years. When the survivor needs the assets for security, that objective should dominate. When the survivor is already secure and the retirement balance is likely to become family legacy wealth, the default deserves to be tested rather than accepted automatically.

But “spouse first” is not the only reasonable answer when retirement assets are very large and the surviving spouse is already financially secure. Some parents want children to receive help at the first death, when mortgages are large, grandchildren are young, businesses are being built, or a child is temporarily out of the workforce. Others want certainty that a portion of their wealth reaches the children regardless of remarriage or future beneficiary changes. There can also be a tax-timing benefit. If Mom and Dad die many years apart, leaving some retirement assets to the children at each death can create two separate 10-year distribution periods. Instead of eventually receiving all of the parents’ retirement wealth within a single 10-year window, the children may recognize the taxable distributions over a much longer period.

The decision should begin with ownership. Employer plans may require spousal consent, and community-property rights may affect what an account owner can direct elsewhere. Estate and tax counsel should establish those rights before beneficiary forms are changed.

Susan’s Direct-Legacy Question

Susan understood the tax advantages of leaving retirement assets to Thomas, but she also wanted her daughters, Emily and Rachel to receive a direct legacy from her at her death. A marital trust could protect the ultimate destination of the assets, but it would not necessarily accomplish that objective.

The family therefore divided the problem. Most retirement assets would remain available for Thomas, while a designated portion would pass to daughter-specific accumulation trusts at Susan's death. The design was not intended to maximize tax deferral. Susan accepted that tradeoff because certainty, protection, and a direct maternal legacy mattered too.

Preserving Options With Cascading Beneficiaries

Families do not always need to lock in one rigid outcome decades in advance. A spouse can be named as primary beneficiary with children, trusts, or charities as contingent beneficiaries. After the first souse’s death, a surviving spouse may be able to evaluate actual needs and, with legal advice, disclaim a portion so that it passes to the named contingent beneficiaries.

Qualified disclaimers are technical and time-sensitive, but when appropriately structured they can preserve an important decision for the surviving spouse until actual circumstances are known.

RMDs as a Multi-Year Tax Plan

An RMD should not be viewed only as an annual compliance number. Long-range projections can identify years when recognizing additional retirement income may be more attractive and years when it may be unusually expensive.

Roth Conversions: Choosing Who Pays the Tax

A Roth conversion does not make tax disappear. It changes who pays the tax, when income is recognized, and how much future growth may occur tax free. For families expecting to leave substantial traditional retirement assets to high-income children, the relevant comparison is the parents' intentionally selected tax cost today versus the potential future cost to a surviving spouse, adult children facing the ten-year rule, or a trust subject to compressed tax brackets.

Conversions rarely need to be all or nothing. A carefully modeled series of partial conversions may reduce future pre-tax balances while preserving flexibility. The plan should also consider cash available outside the IRA to pay the tax, state income taxes, charitable goals and Medicare premiums.

Roth + Accumulation Trust: Tax Planning Meets Legacy Planning

Roth conversions and accumulation trusts can be particularly complementary for families whose objective is multigenerational wealth. The Roth conversion addresses the tax character of the retirement wealth by intentionally recognizing income during the owners' lifetimes. The accumulation trust addresses the ownership and protection of the wealth after death by allowing assets to remain in a family trust rather than necessarily passing outright to a child.

Used together, the strategies ask two different questions: When and by whom should the income tax be paid? And after the parents are gone, how should the remaining wealth be protected and governed?

For families likely to leave more retirement wealth than they will consume, addressing both questions together can be powerful.

Charitable Planning: Match the Most Tax-Burdened Asset with the Tax-Exempt Beneficiary

Traditional IRA dollars can be highly efficient charitable assets. Individual heirs pay income tax on taxable traditional IRA distributions, while a qualified charity pays no income tax on the retirement assets it receives. A charitably inclined family may therefore direct some traditional IRA assets to charity and preserve Roth assets or taxable assets with more favorable characteristics for family.

During life, a qualified charitable distribution (QCD), available after age 70 ½, can satisfy all or part of an eligible owner’s RMD while excluding the qualifying amount from gross income. Donor-advised funds, gifts of appreciated securities, QCDs, and charitable beneficiary designations solve different problems and should be coordinated rather than treated as interchangeable.

Rethinking “Spend Taxable Assets First”

“Spend taxable assets first and preserve tax-deferred accounts for last” is a useful rule of thumb, particularly while lifetime security remains the priority. But when retirement accounts are likely to substantially exceed lifetime needs, those accounts also represent future taxable income for a surviving spo

use, children, or trusts. Strategic withdrawals, Roth conversions, charitable distributions, and beneficiary planning may therefore produce a better family-wide result than simply maximizing the pre-tax balance at death.

Laura and Michael’s concerns were shaped by real life: professional liability, business risk, personal guarantees, divorce, and the reality that circumstances can change, even for responsible adult children. They were not trying to protect the inheritance from their sons, David and Andrew. They wanted to protect it for them.

David had experienced a difficult divorce. Andrew was bright and capable, but Michael did not want him deciding alone whether a substantial inheritance should finance his next get-rich-quick crypto investment or another high-risk business idea. Their planning therefore considered not only the sons themselves, but also the risks that could arise around them, including divorce, lawsuits, creditors, business failures, and poor financial decisions.

An outright inheritance offered maximum flexibility but placed the assets squarely within the sons’ personal financial lives. A conduit trust provided greater structure, but its protection diminished as retirement-account distributions were required to pass out to the beneficiaries. An accumulation trust better matched Laura and Michael’s objective: preserving after-tax family wealth for their sons while providing greater protection and stewardship for future descendants.

Trustee Governance Is a Family Decision

Choosing a trustee is not merely filling a blank in a legal document. It is designing a decision-making system that may have to work for decades.

Laura did not want a distant institution making every personal decision for a grandchild. Michael did not want Andrew deciding alone whether trust assets should finance Andrew’s next business idea. A blended structure offered a middle ground: family knowledge combined with independent judgment for conflicts, unusual distributions, or technical matters.

A trust protector may provide a limited ability to remove and replace a trustee or address certain administrative problems. A protector is not automatically a trustee and has only the powers granted by the document and applicable law. Those powers should be carefully limited so they do not undermine tax or asset-protection objectives.

HEMS in Everyday Language

HEMS stands for health, education, maintenance, and support. It is often used as a measurable distribution standard within trusts, especially when a beneficiary also serves as trustee. But HEMS is not a complete operating manual.

A trustee may still need to decide whether the trust should help with medical care, graduate school, housing, transportation, insurance, or a family need. The actual trust language should explain whether other resources must be considered, may be considered, or can be ignored. Good trustees understand the document, gather relevant facts, apply a consistent process, document significant decisions, and obtain professional advice when necessary.

Adult children should understand what they may inherit, the distribution rules that may apply, and how the inheritance could fit into their own financial lives. The challenge is not simply receiving wealth but learning to manage it wisely.

Children should also understand what a trust is intended to accomplish. A trust is not necessarily a statement of distrust. It may protect inherited assets from creditors, lawsuits, divorce, or financial inexperience. It may also provide investment management, governance, and continuity across generations.

Their own planning remains essential. A future inheritance should not replace disciplined saving, insurance, debt management, beneficiary planning, or estate documents. Generation Three will eventually become the planning generation for Generation Four.

A brilliant trust that is not correctly named on the beneficiary form does not accomplish its purpose. A beneficiary designation that uses the wrong legal name, a custodian that will not accept custom language, or an old form left behind after a rollover can quietly undo years of planning.

Implementation requires the estate-planning attorney, tax professional, fiduciary advisor, and custodian to work from the same facts and intended outcome. The documents should do more than name recipients. They should provide the authority, safeguards, and flexibility the decision-makers will need when the moment arrives.

A Practical Family Checklist

• Inventory beneficiary designations for every IRA, Roth IRA, inherited IRA, 401(k), 403(b), pension, annuity, and other qualified account. (Review life insurance beneficiary designations while you are at it!)
• Identify each owner’s RMD beginning age.
• Project lifetime RMDs, likely account growth, and beneficiary tax brackets.
• Decide account by account among spouse, children, trusts, and charity.
• Confirm whether each retirement-account trust is intended to be a see-through trust and whether it is conduit or accumulation.
• Seek counsel to review old trust language that may have been drafted around pre-SECURE stretch rules.
• Model multi-year Roth conversion ranges, not merely a one-year transaction.
• Coordinate QCDs, donor-advised funds, charitable beneficiaries, and gifts of appreciated property.
• Use exact legal names on beneficiary forms and obtain written custodian confirmation.
• Recheck after marriage, divorce, birth, death, trust amendment, rollover, or custodian change.

Questions to Bring to the Planning Meeting

1. How much of our retirement wealth are we realistically likely to spend?
2. If one spouse dies first, how much flexibility does the survivor need?
3. Do we want children to receive anything at the first death?
4. Which children need simplicity, protection, oversight, or professional management?
5. Are our children likely to inherit during high-income years?
6. Would charitable goals be better funded with traditional IRA assets?
7. Could partial Roth conversions during the owner's life improve the family-wide result?
8. Do our current trusts reflect the SECURE Act and our adult children’s current lives?
9. Will our custodian administer the beneficiary structure as intended?
10. Who is responsible for keeping every document and form aligned?

Six months later, Susan and Laura returned to the same restaurant.

“So,” Laura Bennett asked, “did you get an answer to the question we left here with?”

Susan Carter laughed. “I got a lot more questions before I got any answers.”

That, they agreed, was probably a good sign.

Their first conversation had focused on the different inherited IRAs they had received. Susan had inherited time and flexibility under the older rules. Laura Bennett had inherited a ten-year deadline. But the more important question was no longer what they had inherited. It was what their own children might someday receive.

Two Families, Two Different Plans

For Susan and Thomas, lifetime security came first. Once their projections showed that substantial retirement wealth could remain after providing for both of them, they coordinated beneficiary designations with their daughters’ trusts, reviewed their charitable strategy, and identified a portion of the estate they wanted Emily and Rachel to receive directly from Susan. They also established a range for partial Roth conversions that could be revisited each year as income, deductions, tax laws, charitable giving, and family circumstances changed. The plan gave them a process without pretending they could know today what the right conversion amount would be years from now.

Laura and Michael placed greater emphasis on protection. Their concerns were shaped by divorce, business risk, creditor exposure, and the possibility that circumstances surrounding a responsible adult child could change unexpectedly. They concluded that naming their sons outright would not necessarily provide the protection, stewardship, and flexibility they wanted after the inherited retirement accounts had been distributed. As Laura explained, “We’re not protecting the money from them. We’re trying to protect it for them.”

Neither family had found a loophole or eliminated taxes. They had made different decisions because they had different objectives. Susan and Thomas emphasized tax planning, charitable coordination, and a direct legacy for their daughters. Laura and Michael emphasized trusts, protection, and stewardship for children and future grandchildren.

Those approaches need not be mutually exclusive. For families concerned with both taxation and multigenerational protection, Roth planning and a properly designed accumulation trust can address different parts of the same legacy challenge. Roth conversions can improve the tax character of inherited wealth, while an accumulation trust can provide protection, governance, and a structure for preserving that wealth across generations.

Good Planning Preserves Flexibility

No plan can predict every divorce, lawsuit, illness, business opportunity, tax-law change, or future family need. That uncertainty is not an argument against planning. It is one of the reasons planning matters.

A strong plan establishes clear objectives, protects wealth where protection matters, and gives a surviving spouse, executor, trustee, or beneficiary enough flexibility to respond when the facts are known. This becomes especially important when retirement accounts are likely to exceed the owners’ lifetime needs and a portion of the balance has effectively become family legacy wealth.

Conventional advice may still be appropriate: take the required minimum, defer the tax, spend taxable assets first, and leave retirement accounts to the surviving spouse. But when substantial retirement wealth is likely to remain, those defaults should be tested rather than accepted automatically.

The question is no longer simply how long the family can defer income tax. It is how the remaining wealth can provide the greatest usefulness, protection, flexibility, and opportunity across generations.

Build Better Options

Laura summarized what both families had learned.

“We can’t control what the tax law will be. We can’t control what happens in our kids’ lives. And we can’t know exactly what they’ll need.”

Susan nodded.

“But we can give them better options.”

That became the common ground between two families that had made different planning decisions.

The Question to Ask Now

If your retirement accounts became part of your estate tomorrow, would the plan work as intended?

Would your spouse have enough? Would your children inherit a large taxable retirement account during high-earning years? Would the inheritance have the protection you intended? Would your trustees, executors, and beneficiaries have useful options when the facts are finally known?

If the answers are uncertain, start with a projection. Estimate what you are likely to need during your lifetime and what may remain. Then determine how the current beneficiary structure could affect your spouse, children, trusts, charities, and future generations.

Bring the estate-planning attorney, tax professional, fiduciary advisor, and custodians together to evaluate the alternatives and ensure that the estate documents, beneficiary forms, tax strategy, and account records support the same plan.

The SECURE Act is what it is. The choice is whether to let default conventions determine the outcome or to plan deliberately within the rules.

The goal is not simply to leave the largest retirement account. It is to use what you need, preserve your own security, and give the people responsible for what remains better options for creating a useful, protected, and lasting family legacy.

Educational Note and Selected Authorities

This article is for general educational purposes and is not individualized tax, legal, or investment advice. Tax laws, Treasury regulations, state trust law, beneficiary circumstances, custodian practices, and account contracts can change. Any strategy described here should be evaluated and implemented with qualified tax, legal, and financial professionals. Statements about creditor and divorce protection depend on the trust terms, state law, beneficiary control, and the facts of any claim.

Selected authorities include IRS Publication 590-B, Distributions from Individual Retirement Arrangements; IRS Publication 590-A, Contributions to Individual Retirement Arrangements; Treasury Decision 10001 and the final required minimum distribution regulations; and applicable state trust and marital-property law. Current limits, tax brackets, and administrative procedures should be confirmed before implementation.

Copyright © 2026 Waterworth Wealth Advisors, LLC. Educational material only. This article reflects the author’s professional judgment, experience, analysis, and substantial personal investment of time in developing, testing, refining, and communicating the planning concepts presented. Microsoft Copilot, an artificial-intelligence tool, was used as a research, organizational, analytical, and editorial assistant during the production process, including helping explore questions, organize material, test explanations, revise drafts, and improve clarity and presentation. Copilot did not replace the author’s judgment or professional expertise, and its output was not accepted without review. The author directed the scope and conclusions of the work, evaluated and revised AI-assisted material, and is responsible for the final content. Technical tax and legal conclusions should be independently reviewed with qualified legal and tax professionals before implementation.

Securities offered through Kestra Investment Services, LLC (Kestra IS), Member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Kestra IS or Kestra AS are not affiliated with Waterworth Wealth Advisors, LLC. Waterworth Wealth Advisors, LLC does not offer tax or legal advice. Investor Disclosures: https://www.kestrafinancial.com/disclosures .