--- title: "Your Trust Could Reach the 37% Tax Bracket at Just $16,000" slug: "your-trust-could-reach-the-37-tax-bracket-at-just-16-000" description: "Learn how SECURE Act rules can affect inherited IRAs, trusts, and estate planning." canonical_url: "https://www.mattiacelegal.com/insights/your-trust-could-reach-the-37-tax-bracket-at-just-16-000" md_url: "https://www.mattiacelegal.com/insights/your-trust-could-reach-the-37-tax-bracket-at-just-16-000.md" excerpt: "Learn how SECURE Act rules can affect inherited IRAs, trusts, and estate planning." category: "estate-planning" published_at: "2026-09-01" status: "published" featured: false author_name: "Mattiace Legal" author_role: "Legal Team" author_image: "https://objuzyybpl5vsw4r.public.blob.vercel-storage.com/insights/media/2026-09-01/bee90e220adceb8f0c9e5fe6efc9407a-Zx4nvVSEMqBEeaez1sA1TDrri9hN8N.jpg" image: "https://objuzyybpl5vsw4r.public.blob.vercel-storage.com/insights/media/2026-09-01/bee90e220adceb8f0c9e5fe6efc9407a-mr8dfbH2ARnfda3kLy5HqyzO2rIAYx.jpg" image_alt: "Hero image showing protective hands surrounding a house, with U.S. currency in the background, representing home and asset protection." updated_at: "2026-09-01T19:06:06.569Z" last_updated: "2026-09-01T19:06:06.569Z" --- # Your Trust Could Reach the 37% Tax Bracket at Just $16,000 > Learn how SECURE Act rules can affect inherited IRAs, trusts, and estate planning. # Your Trust Could Reach the 37% Tax Bracket at Just $16,000 If you have an IRA or other retirement account, your beneficiary designation is an important part of your estate plan. This becomes even more important when a trust is named as the beneficiary. Changes to inherited retirement account rules under the SECURE Act have made retirement planning more complicated, particularly when a trust is involved. The trust that made sense when you created your estate plan may need to be reviewed to make sure it still works with today's rules. One issue that deserves particular attention is how retirement account distributions are taxed when they are received by a trust. ## How the SECURE Act Changed Inherited IRAs Before the SECURE Act was enacted in 2019, many non-spouse beneficiaries could stretch inherited IRA distributions over their lifetimes. This allowed beneficiaries to spread taxable withdrawals over many years. The SECURE Act generally replaced that approach with a 10-year distribution period for most non-spouse beneficiaries. There are exceptions for certain beneficiaries, including surviving spouses, qualifying minor children, and individuals who are disabled or chronically ill. The rules can also depend on whether the original account owner had reached the applicable required beginning date for distributions. For traditional IRAs, distributions are generally taxable income. If a beneficiary must withdraw a substantial amount over a shorter period, those distributions can increase their taxable income, potentially affecting their overall tax liability. When a trust is the beneficiary, the analysis becomes more complicated because the trust's terms and the identity of its beneficiaries can affect how the retirement account is handled. ## Why Trust Tax Rates Matter For 2026, estates and trusts reach the 37% federal marginal income tax bracket once taxable income exceeds $16,000. That does not mean the entire amount is taxed at 37%. Federal income tax brackets are marginal, meaning different portions of taxable income are taxed at different rates. The important point is that trusts can reach the highest federal income tax bracket at a much lower level of taxable income than individuals. This can create an important planning consideration when a trust receives distributions from an inherited retirement account. However, taxes should not be the only consideration. ## Protection and Tax Efficiency May Point in Different Directions When retirement accounts are left to a trust, the trust may generally be structured in different ways. A **conduit trust** generally requires retirement account distributions received by the trust to be distributed to the beneficiary. This can result in the income being taxed on the beneficiary's individual tax return rather than being retained and taxed at the trust's compressed tax rates. An **accumulation trust**, on the other hand, may allow the trustee to retain distributions within the trust. This can provide additional control and protection over the inherited assets, but income retained by the trust may be subject to the higher trust tax rates. Neither approach is automatically better. For one family, minimizing the beneficiary's tax burden may be the priority. For another, keeping inherited assets protected from circumstances such as divorce, lawsuits, or poor financial decisions may be more important. The right structure depends on the beneficiary, the family's goals, the assets involved, and the protections the trust is intended to provide. ## Your Beneficiary Designation Matters Your IRA generally passes according to its beneficiary designation rather than the instructions in your will. That means having an updated estate plan is not enough if your retirement account beneficiary form does not match the plan. For example, your current estate plan may direct an inheritance into a trust, while an outdated IRA beneficiary designation names a child individually. In that situation, the retirement account may not follow the structure you intended. Beneficiary designations should be reviewed whenever there is a significant change in your family, finances, or estate plan. They should also be reviewed after major changes to retirement account rules. ## Look at the Whole Plan, Not Just the IRA Retirement planning should be coordinated with the rest of your estate plan. When reviewing an IRA that names a trust as beneficiary, it may be necessary to consider: - The terms of the trust. - The identity and circumstances of the beneficiaries. - Whether the trust is intended to provide asset protection or control. - The beneficiary designation on the retirement account. - The expected tax consequences of future distributions. - Your other retirement and non-retirement assets. - Your overall estate planning goals. This is also an area where coordination with your financial advisor and tax professional can be especially valuable. The legal structure, investment strategy, and tax consequences should work together rather than being considered separately. ## Review Your Plan Before You Need It If your estate plan was created before the SECURE Act, your retirement accounts have grown significantly, or you have a trust named as an IRA beneficiary, it may be time to review the plan. Estate planning is not a one-time process. Changes in the law, family circumstances, account values, and financial goals can all affect whether an existing plan still makes sense. A review can help identify whether your beneficiary designations, trust provisions, and retirement planning strategy continue to work together as intended. Schedule a complimentary 15-minute discovery call [here ](https://app.lawmatics.com/forms/share/077f15c4-1804-42bf-a772-c48e25c0e0a6)to review your current estate plan. ## Sitemap See the [Markdown sitemap](https://www.mattiacelegal.com/sitemap.md) for all published pages.