Do I Need a Federal Tax Id. for My Living Trust?

When estate planning lawyers set up a Living Trust (also sometimes called a Revocable Trust), we instruct clients to title their non-qualified assets in the name of the Trust. Not infrequently, clients try to do this and are mistakenly asked by their bank or credit union: what is the Tax Id. number for the Trust? The question wrongly implies that a Living Trust must have a separate Tax Id. number. This blog discusses that misunderstanding. 

When a person sets up a Living Trust and is acting as Trustee, the Trust does not have a separate Tax Id. number. The reason for this is that as long as the Grantor/Settler of the Trust is also the Trustee, the Trust is just viewed as an alter ego of the person. In other words, the Trust is just another version of the person and is not viewed as a separate entity.

For this reason, the Trust uses the Social Security number of the Grantor/Settler for tax identification purposes. When there is income generated by assets held in the Trust, that income is claimed on the individual tax return--Form 1040--of the Grantor/Settler. No separate tax return is filed for the Trust.

However, when the Grantor/Settler dies, then the successor Trustee of the Trust must apply for a separate Tax Id. number. As a result, the Trust must then begin filing income tax returns annually using the new Tax Id. number for identification. these returns are usually filed on IRS Form 1041.

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