Think Twice Before Naming Your Trust as Beneficiary

March 30, 2026 • By Russell W. Hall, CFP®

Revocable living trusts are very useful tools, especially in states like California, where trusts can help avoid the lengthy and expensive probate process. But if you have a living trust or are in the process of creating one, the question of how to complete beneficiary designations can be confusing and problematic.

Beneficial Beneficiaries

Retirement accounts such as IRAs, Roth IRAs, and 401(k)s cannot be owned directly by a trust during your lifetime. Instead, they pass by beneficiary designation, which is powerful because it controls where the account goes even if your will or trust says differently.

This has resulted in some unintended situations, such as only one child inheriting an account even though the trust states everything should be divided equally among all children. We previously covered this important topic here, but it bears repeating: Check your beneficiary designations.

Because trusts contain detailed instructions about how assets should be distributed, we’ve found that many estate planning attorneys instruct their clients to name the trust as the sole beneficiary of retirement accounts. The thinking is reasonable: “If the trust already says who gets what, let’s just run the retirement accounts through the trust.” Sometimes that is the right answer, but not always.

Marital Issues

For married couples who want their retirement accounts to pass outright to each other, naming the trust as the primary beneficiary can add unnecessary complexity. In some cases, where the trust hasn’t been updated in a long time, it may also limit the surviving spouse’s options or even force the inherited account to be owned by the trust (which can make things more complicated from an administrative and tax perspective).

Naming a spouse as the primary beneficiary often provides more flexibility. For example, a surviving spouse can usually treat an inherited IRA as his or her own IRA, which can be simpler and offer better options for required minimum distributions (RMDs).

Note that the surviving spouse could also elect to treat the account as an inherited IRA, which would allow penalty-free withdrawals before age 59 ½. In that case, the inherited IRAs would not be subject to the 10-year rule from the SECURE Act (more information about the 10-year rule here).

For that reason, when a married couple wants the surviving spouse to have full access and control, we recommend naming the spouse directly as the primary beneficiary.

Children Considerations

The decision can be more complicated when children are involved. For couples with minor children, we usually recommend naming the spouse as the primary beneficiary and the trust as the secondary (contingent) beneficiary. The trust will then name a trustee to manage the assets for the children and follow the trust's terms, including when (if ever) the children should receive the funds without restrictions.

If the trust says adult children should receive everything outright and free of trust, then naming the children directly as beneficiaries is simpler. This lets the accounts pass outside the trust, which is usually a faster and cleaner process.

However, if assets are kept in trust for an adult child, naming the trust as beneficiary may be appropriate. We usually see this in situations involving special needs, substance abuse, spendthrift issues, blended families, and other family circumstances.

It is also not an all-or-nothing decision. One child might be named directly, while another child’s share is directed to a trust.

A Final Question

As you are thinking through these issues, ask yourself: What do I want to happen to this specific account after I die?

• For most married couples, consider naming the spouse as the primary beneficiary.

• For families with minor children, consider naming the spouse as the primary beneficiary and the trust as the secondary beneficiary.

• For families with responsible adult children, consider naming them directly rather than the trust.

• For families with special circumstances as outlined above, consider naming the trust.

Our bottom line here is that if your trust is listed as either the primary or contingent beneficiary, that does not automatically mean it is wrong. But it does mean the designation should be reviewed carefully, along with the trust document itself, to make sure the arrangement still fits your goals.

We are happy to help you think through these decisions as part of your broader estate and financial planning. Schedule a complimentary introductory call with a fee-only, fiduciary advisor.