When retirement accounts pass via trust to a minor child, both time and tax planning become very important. The SECURE Act 2.0 modified the treatment of inherited IRAs, and in that changed the taxation of distributions to children, as well as when distributions must be taken.
A conduit trust requires the trustee to pass all retirement distributions directly to the child. This keeps things simple and qualifies the child for “Eligible Designated Beneficiary” (EDB) status until age 21. During that time, distributions follow the child’s life expectancy.
However, once the child turns 21, the clock starts: All assets must be withdrawn within 10 years, and possibly in annual installments, depending on when the account owner passed away.
An accumulation trust, by contrast, gives the trustee power to hold distributions inside the trust. This protects assets from creditors or early spending but comes with a tax tradeoff.
Distributions retained by the trust are taxed at high rates quickly. Unless the remainder beneficiaries qualify to be ignored under IRS rules, the account may need to be emptied within 10 years of the original owner’s death, even if the child is still a minor.
Families often overlook how fast taxes increase. Conduit trusts expose the child’s distributions to the “kiddie tax,” which means those funds may be taxed at the parents’ rate.
On the other hand, accumulation trusts trigger the trust’s compressed income brackets and possible net investment income tax. On top of that, the IRS confirmed that individuals who turn 73 in 2024 must begin required minimum distributions by April 1, 2025, ending the extended grace period previously available under pandemic-era relief rules.
At O’Brien Law Firm, LLC, we help clients across DeSoto County and Memphis draft minors’ trusts that honor their wishes without triggering avoidable taxes. Whether you’re creating a new estate plan or adjusting an outdated one, we’ll help you apply the SECURE Act 2.0 rules correctly. Call 662-672-7619 or fill out our intake form to get started.
Subchapter V is a simplified version of Chapter 11 bankruptcy designed to help small business owners reorganize without losing control of their operations. It’s faster, cheaper, and gives owners more say in how debts are repaid.
Sole proprietors in Southaven, Memphis, or any city across the USA may find Subchapter V as a beneficial path in navigating their bankruptcy process. However, a sole proprietor must ensure it is done properly and with all considerations considered.
Subchapter V isn’t available to everyone. As of April 2025, your total non-contingent debt must be under $3.42 million, and at least half of that must come from business activity. If most of your debt is personal or if your business is focused on one rental property, you may not qualify.
Another issue is that you must be “engaged in commercial activity” at the time you file. That can include winding down or collecting receivables, but it’s something courts look at closely.
Even if creditors reject your plan, you may still get it confirmed through a cramdown. To do this, you must commit all your projected disposable income over three to five years.
You also need to show that the plan is feasible and includes remedies if you fall behind, like allowing a creditor to take the asset back. However, unlike traditional Chapter 11, you don’t have to pay creditors in full before keeping your business.
Subchapter V lets business owners stay in charge. There’s no creditors’ committee unless the court orders one, and there are no U.S. Trustee fees. If you meet deadlines and remain in good faith, you retain full decision-making power. This control is often what makes Subchapter V attractive for sole proprietors looking to stay afloat.
At O’Brien Law Firm, LLC, we help sole proprietors across DeSoto County and Memphis use Subchapter V to save their businesses and reset their finances. Call 662-672-7619 or complete our intake form to schedule a confidential consultation.
