How to Set Up a Tax ID Number for a Trust Account

By Larissa Bodniowycz, J.D.

How to Set Up a Tax ID Number for a Trust Account

By Larissa Bodniowycz, J.D.

A tax identification number is a nine-digit number assigned by the IRS to businesses, trusts, and individuals for tax reporting purposes. The terms "employment identification number," "EIN," and "FEIN" also refer to tax ID numbers. A trust required to have a tax identification number can obtain one by submitting a request to the IRS.

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1. Determine whether a tax identification number is necessary.

In a trust account, a third party holds funds or assets for the benefit of another party. There are many different types of trusts, and not all types require a tax ID number.

Speaking broadly, there are two main types of trusts: living trusts and irrevocable trusts. In a living trust, also called an inter vivos or revocable trust, the trust creator places assets into the trust for their own benefit during their lifetime. The creator can change or cancel the trust any time they want. Living trusts can have multiple founders, most often a married couple. These are called joint trusts.

An irrevocable trust, in contrast, is a trust the creator cannot change or cancel after forming it without permission from the beneficiary. When you transfer your assets into an irrevocable trust, you remove your rights of ownership.

Generally, a tax ID is not necessary for a living trust. Instead, a revocable trust uses its creator's Social Security number for tax identification purposes, and the creator reports it on their tax return. If there are multiple trust creators, the creators can decide among them whose Social Security number to use. Unlike revocable trusts, irrevocable trusts are their own entity. Irrevocable trusts must file a separate income tax return and have a tax identification number.

One tricky situation that often arises involves a trust that starts as a living trust but automatically becomes an irrevocable trust when its creator dies. In this case, during the creator's lifetime, the trust uses its creator's Social Security number for tax purposes. Upon the death of the creator, the trust requires its own tax ID number.

2. Gather the information needed for a tax identification number application.

To obtain a tax identification number from the IRS, you need to complete an application online or in hard-copy form. To expedite the completion of the application, gather the information you need for the application before you sit down to complete it. For the application, you need the legal name of your trust, the trustee's name, the trust's mailing address, the type of trust, the date of funding, and the closing month of the accounting year. You also need to provide your legal name and Social Security number.

3. Submit the application.

The final step to obtain the tax identification number is to apply for it with the IRS. You can obtain a tax identification number instantly by completing the IRS EIN Tax ID Number Online Application online. Alternatively, you can print and complete the Application for Employer Identification Number (Form SS-4) and mail or fax it to the IRS. If you mail the application, it usually takes weeks to receive your tax identification number; completing the online form is your best option.

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