Clients often ask their estate planning attorney whether they need a federal Tax Id. (also known as an EIN) number for their Trust. In fact, clients commonly run into third parties, such as bank representatives, who ask what the Tax Id. number is for their Trust.
Generally speaking, no Tax Id. number is needed for a Living or Revocable Trust while the grantor is still living. Instead, the grantor’s Social Security number is used for tax purposes relating to the Trust. So if a client establishes a Living Trust and then sets up an investment account in the name of the Trust, the account will use the grantor’s Social Security number while the grantor is still living. Any income associated with the assets of the account held in the Trust are claimed on the grantor’s individual income tax return. while the grantor is living, the Trust does not file a separate income tax return.
After a grantor dies, this changes. After the grantor’s death, the deceased grantor’s Social Security number must be replaced by a federal Tax Id. number. The Trustee can get this new Tax Id. number by using IRS Form SS-4. One of the reasons for this requirement is that while the grantor is living, the Trust is just an extension of the individual grantor and is subject to revocation or amendment. When the grantor dies, the Trust becomes irrevocable and is treated as an entity. The Trust must then file a separate income tax return using the Tax Id. number.
Once the new Tax Id. number is obtained, that number must replace the grantor’s Social Security number on all accounts titled in the name of the Trust. In some instances, the financial institution will require that a new account in the name of the Trust be set up using the new Tax Id. number. The assets in the old account are then transferred into the new account. In less frequent occasions, the financial institution may simply allow the existing account to remain but will change Tax Id. number in place of the Social Security number.