Irs tax id for trust after death

Whether your trust requires its own EIN depends on the type of trust that you have. An EIN, also known as a federal tax ID number, is a nine-digit number that the Internal Revenue Service (“IRS”) assigns to identify an entity for tax reporting purposes. An EIN functions like a social security number.

Generally, revocable trusts do not need an EIN as they are grantor trusts and the trust’s income is reported on the tax return of the trust creator. If you have created a revocable trust, you may revoke the trust at any time and “regain” possession of the trust assets. Accordingly, a revocable trust is an extension of the grantor who created the trust. The grantor pays the income taxes generated by the revocable trust and uses the social security number of its grantor as its tax ID. Couples with a joint revocable trust both hold the power to revoke the trust, either person’s social security number can be used. A separate tax ID is necessary if they do not file taxes jointly.

A revocable trust becomes irrevocable at the grantor’s death. At that time, the trust requires an EIN, as the trust can no longer be associated with the deceased grantor’s social security number.  The trust must file its own taxes.

Some lifetime irrevocable trusts are also grantor trusts and therefore taxed to the grantor just like a revocable trust. While it is not required for these trusts to maintain a separate tax ID, it is sometimes a good idea to assign same. We usually assign a federal tax ID when we do Medicaid Asset Protection Trusts. If an irrevocable trust is not classified as a grantor trust, an EIN is required as the trust is considered a “separate entity” from the grantor.

If your trust requires an EIN, an application is submitted to the IRS as soon as possible. The application contains information from the grantor and the trust to answer a series of questions for the IRS. A trustee can either apply online, or mail/fax IRS Form SS-4. If a trustee applies online, the EIN is available in a matter of minutes. If the application is completed by fax or mail, it may take a few weeks to receive the EIN.

Discuss any questions relating to the need of a separate tax ID for your trust with an experienced estate planning attorney or tax advisor. Since the income tax rate for a trust is usually so much higher than that for an individual, the question of how your trust is taxed is crucial when considering trusts.  If you are wondering if a trust is right for you  – our estate planning attorneys are here to help.

Many people choose to create revocable trusts, also known as living trusts, to state their wishes for what will happen to their personal belongings after their death. Creating a revocable trust establishes a separate legal entity that owns the property that you choose to put into the trust. During your lifetime, the tax impact of having a revocable trust is relatively minimal. However, after the death of the person who created the revocable trust, the nature of the trust changes. If you're the successor trustee of the trust, you'll need to follow some administrative steps in order to treat the trust properly for tax purposes. One of those steps involves getting an employer identification number, or EIN, for the trust.

Trusts and employer identification numbers

In general, trusts are subject to taxation as separate entities. As a result, they'll often have their own identification number for tax purposes.

For revocable trusts, however, a separate EIN is often not necessary. Revocable trusts are treated as what the IRS calls grantor trusts, which allows them to use the Social Security number for the creator or "grantor" of the trust. Any income or deductions that are attributable to the trust simply get added to the grantor's individual tax return. This keeps things simple for as long as the trust continues to be a grantor trust for tax purposes.

What happens to the trust after death?

The reason why the trust will need an EIN after the death of the grantor is that at that point, the trust no longer meets the grantor trust rules and therefore can no longer use the deceased grantor's Social Security number. Going forward, the trust typically becomes irrevocable, and it will need to be treated as a separate taxable entity. Trusts have requirements to file tax returns if they meet minimum income standards for filing, and getting an EIN is necessary in order to file.

In order to get an EIN, you can go to this page on the IRS website to apply electronically. The application will require information about the trust, but you'll immediately receive an EIN that you can use, along with a confirmation document that you should save for your records.

Finally, note that in some cases, the lawyers and other professionals who create a revocable trust will obtain an EIN for the trust even though it's not technically necessary. There's no harm in getting a separate EIN even for a grantor trust, but it's important to make a note of it so that when it does become required, you'll know what it is.

Revocable trusts can be great ways to do estate planning. By knowing the EIN requirements, you won't be surprised if you end up taking over as trustee following a loved one's death.

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