Does a trust need an EIN?

Does your trust need a Tax ID or EIN Number? The long and short answer is “it depends”. However, if it turns out your trust does need an EIN, you should act quickly. Compliance with the IRS is important and having to play catch-up is never a fun time.

In order to determine if your trust needs a Tax ID (EIN) Number, you must first determine what type of trust you have. When a trust is created, it is established as a vehicle for transferring wealth and assets among multiple beneficiaries. When beneficiaries are legally part of a trust, your estate can avoid having to go through the public probate process after your death.

The two most common types of trusts are those that are revocable and those that are irrevocable. A revocable trust is also known as a living trust. If you have created a revocable trust, it allows you to change or terminate the trust at any time of your choosing. However, if you’ve created an irrevocable trust, you have permanently transferred assets into the trust and removed your rights of ownership. You cannot make changes or terminate an irrevocable trust without the permission of the beneficiary or unless rare circumstances apply.

Irrevocable trusts require an EIN. It is important to have this for tax return filings. Revocable trusts do not necessarily require an EIN as you can use the grantor’s social security number, yours if you created the trust if you wish. However, the IRS recommends that both revocable and irrevocably trusts have their own Tax ID (EIN) Number.

A Tax ID (EIN) number allows the IRS to identify a business or trust. If you created an irrevocable trust, you’ll want to apply for an EIN number as soon as possible. This will make it easy for you file taxes, manage the trust assets, and complete financial transactions.

First, you’ll need to name the responsibility party of the trust. This is the individual responsible for the execution of the trust’s guidance on beneficiaries and the distribution of the trust’s assets and wealth. The responsible party of the trust will be required to have a unique identifier of their own, such as a social security number. He/she will also need all important and pertinent information around the trust.

It’s possible to obtain a Tax ID (EIN) number through the IRS’s website or via fax or mail. If you apply via the IRS website, you should have the EIN number in roughly ten minutes. However, if you apply via fax, it can take about a week. Applying by mail typically takes the longest, but you should receive the EIN within a couple of weeks. Your estate planning attorney should be able to apply for the EIN for you, too. While it’s not a complicated procedure, it’s sometimes best to allow a seasoned professional to work for you.