Taxpayer I.D. Numbers for Estates and Trusts.
Whose Tax I.D. Number Do I Use for a Trust?
There are two types of taxpayer identification numbers a Trust might need to use, depending upon what kind of trust it is — and the answer may change over time if the type of trust changes.
♦ Revocable Trusts Use the Maker’s Social Security Number.
A revocable trust uses the social security number of the person who created the trust and still holds the power to revoke the trust. This type of trust is sometimes called a living trust or an inter vivos trust. (Inter vivos is latin for “during life.”) The trust does not have to file its own tax return. Instead, its income is reported on the tax return of the trust creator holding the power to revoke. Its reported just like any other income and the trust itself is not even referred to on the return.
When two people (such as a married couple) created a joint trust and both hold the power to revoke the trust, then either of their social security numbers may be used. Just remember that the social security number used is the one against which the trust income will be reported to the IRS. If the joint trust makers are reporting their taxes on a joint return, then the number used doesn’t really matter. But couples filing separate returns should consider on whose return they want to report the taxes when deciding which number to use.
♦ Irrevocable Trusts Usually Need Their Own Number.
Once a trust has become irrevocable, it usually cannot use the social security number of the trust creator and must obtain its own taxpayer identification number (“TIN”) from the IRS. For instance, when the creator of a revocable trust dies and the trust will now be benefiting other people, a TIN is required. When the creator of make an irrevocable trust for the benefit of others and gives up enough rights to receive or control the trust property, a TIN may also be required, but that situation is more complicated and you should consult your CPA or tax adviser to be sure. An irrevocable trust that needs its own TIN must also file its own tax returns.
When you do need a TIN, it is pretty easy to get on the IRS website. Just be sure you’ve only asked for one number — if a CPA or a prior Trustee already obtain a number for the trust, use that one. The better course of action is to let your CPA or adviser get the number for you.
(The TIN is often referred to as the “EIN,” but that is technically incorrect. An EIN is an “employer identification number.” But the terms are used so interchangeably that only CPAs tend to notice the difference.)
♦ A Revocable Trust May Become Irrevocable When the Maker Dies.
A trust may start out as a revocable trust, for which using the social security number of its creator is fine, but later become an irrevocable trust. This usually occurs when the creator of the trust dies. If a married couple creates a joint trust, all or part of the trust may become irrevocable when one spouse dies, even though the other spouse is still living. Any portion of a trust that is irrevocable must have its own TIN (EIN), so when that happens, you need to get one. Some trusts are irrevocable from the beginning. Those would need a TIN (EIN) right away.
♦ A Trust Does Not Use the Social Security Number of the Trustee.
A trust never uses the social security number of the Trustee, unless the Trustee is also the creator holding the power to revoke the trust. If the Trustee changes, you still use the social security number of the creator holding the power to revoke (if there is one), or the TIN (EIN) you got from the IRS for an irrevocable trust.
Administrative Trust and Estate Administration Tax I.D. Numbers.
A separate taxpayer I.D. number might be needed for an “administrative trust” or “estate administration.” These are special taxpayer numbers that are used only for the time it takes to settle up a deceased person’s final affairs. After the estate administration or the initial administration of the trust are finished, the number is no longer needed. If it was an estate administration (a probate), a final tax return is filed and the number is not further used. If it was an administrative trust and the trust distributed all assets, the same thing happens.
However, many trusts retain assets in the trust for long periods of time, such as until children have grown or specific ages are reached. In that case, when the administrative trust period ends, a new taxpayer I.D. number may be needed for the ongoing trust. Your tax advisor should be able to help you make that determination.
Tax I.D. Numbers on the Web.
Taxpayer I.D. numbers for trusts and estates are applied for an obtained via the IRS.gov website. You can apply for one yourself, but it is strongly advisable to let your tax advisor or attorney do that. Once the I.D. number is created, the IRS tends to start looking for returns. If done incorrectly, it may require more paperwork and expense to “clean up.” If you decide to do it yourself, be sure to review the instructions on the government website carefully before going forward.