Conduit Provision

A conduit provision is a provision in a trust that requires the trustee to immediately distribute any retirement account distributions (e.g., from an IRA or 401(k)) received by the trust directly to the identified beneficiaries.

This provision allows the trust to act as a “pass-through” entity, ensuring that the distributions are taxed at the individual beneficiary’s tax rate rather than the typically higher trust tax rate. Conduit provisions are often used in estate planning to simplify tax treatment and maintain compliance with certain retirement account rules.