Understanding Who Should Be Beneficiary of Your IRA
How to Turn a Modest Inheritance Into Millions for Your Family
13. Are there any disadvantages?
You will not be able to provide for your spouse and stretch out the tax-deferred growth beyond your spouse's actual life expectancy. That's because you must use the life expectancy of the oldest beneficiary of the trust which, in this case, would probably be your spouse.
Also, many trusts pay income taxes at a higher rate than most individuals, but this only applies to income that stays in the trust. (If you have a revocable living trust, this would only happen after you die.) Distributions from your tax-deferred account that are paid to the trust are subject to income taxes. And if the money stays in the trust, the higher tax rates would apply. But usually this is not a problem because the trustee distributes the money to the beneficiaries of the trust, who pay the income taxes at their own rates.
Finally, the trust must meet certain IRS requirements, including that it is a valid trust under state law.