If the retirement accounts were funded from pretax dollars, then someone has to report the income when the distributions are made. Typically, that will be the retiree, or the beneficiary after the retiree passes. There is no configuration to avoid reporting that income. If some of the retirement funds came from after tax money, like if you had a ROTH IRA or a non deductible IRA, then the only income to be reported is the earnings on the investments, when the withdrawals are made. You can plan for how much tax you want to pay by keeping an eye on your total income. As an example, if the beneficiary is in the 12% tax bracket, they may want to make sure that they don't take so much out that it pops them up to the next higher tax bracket. Take a little each year to keep the taxes from eating up more of the account. Keep in mind that if the trust is going to hold the retirement funds, the trust needs to be the beneficiary so that the funds are not liquidated until the trustee decides to distribute those funds.
