The death of a family member is always challenging and evokes difficult emotions for everyone involved. Unfortunately, tax problems brought on by a trust can sometimes be one of the stressors. Because grantors don’t always acquire an EIN for the created trust, their heirs or beneficiaries may have to do so after the fact. If the grantor in a revocable trust has died, making the trust irrevocable, you will need to complete the application for an EIN. To get all of your estate planning questions answered, you can speak with a financial advisor.
Is an EIN Required for a Trust After Death?
Whether your trust needs an EIN depends on the trust in question. All trusts legally move wealth to your beneficiaries, but the type of trust and who is on it can vary. Typically, it will either be revocable or irrevocable.
A revocable trust also called a living trust, is a good idea if the grantor wants to modify the trust after creating it or reclaim the assets. Alternatively, an irrevocable trust places assets into the trust irreversibly. Once you make an irrevocable trust, you no longer own the assets therein. You can only adjust or revoke the trust if you gain authorization from the beneficiary.
An irrevocable trust requires an EIN. This condition is especially pertinent for filing taxes and selling or purchasing assets. On the other hand, a revocable trust only requires your social security number because the creator includes the trust’s gains on their taxes.
However, it’s recommended that you use an EIN for either kind, specifically because the grantor’s death means the trust becomes irrevocable. Once the grantor passes away, the trust needs its own tax number, as the grantor’s Social Security number is no longer sufficient.
Therefore, while a revocable trust does not initially need an EIN, it’s an excellent idea to apply for one just as you would for an irrevocable trust to avoid difficulties managing it.
What Information Do You Need for an EIN?
An EIN helps the Internal Revenue Service (IRS) recognize your trust. Therefore, quickly acquiring an EIN for your irrevocable trust is crucial, as you want to file taxes and handle your wealth without trouble. The first piece of information needed for an EIN is the name of the person managing the trust. This person allocates funds and distributes wealth according to the direction of the trust. As the responsible party, this individual should provide their social security number for identification and possess all information related to the trust.
How to Apply for a Tax ID Number (EIN) for Trusts
There are three means of applying with the IRS for an EIN: online, mail or fax. Online is faster and more straightforward, but if you aren’t comfortable or don’t have access to the Internet, you can use one of the other options. The details for each are below.
The IRS’s website allows you to apply online for an EIN. You can fill out and submit the application electronically if you have the needed information in front of you and the process can be completed in a matter of a few minutes.
Once you send your application to the IRS, their authentication process typically takes a few minutes. After the IRS verifies your information, they send you a nine-digit EIN specific to your trust. This method allows you to acquire an EIN easily, meaning you won’t have to wait to modify or take action with the trust.
Mail or Fax
Mail or fax requires that you print out the application form and fill it out. Then, you can mail or fax the finished paperwork. If you send it by mail, you will need to provide postage. The IRS will perform its validation process and send you the EIN through the same means through which the application came. Therefore, if you mailed your application, your tax number will come in the mail and faxed applications will have a faxed EIN.
Either of these methods will take exponentially longer than online. Faxed applications usually take a week, while mailed applications often take two weeks or more for the EIN to reach you. Understanding the timetable for your application can save you the stress of waiting for an EIN that is taking its time. If you have a pressing need for your trust, mailing your application may not be a good idea, as it will take multiple weeks for the IRS to provide identification for your trust.
If you’re the owner of a newly created revocable trust, you can’t go wrong by assigning an EIN to it as soon as you can. This proactive measure will help your beneficiaries and your trustee manage the trust years down the road. If you’re a beneficiary trying to sort out a trust that has become irrevocable, the IRS’s online application process will help you acquire an EIN for the trust in question. If you have the necessary information available, you could get an EIN in minutes. To learn more, financial advisors can help answer all of your estate planning questions.
Tips for Estate Planning
- If you’re wondering how to create a trust or allocate your assets, you don’t have to go it alone or leave it to a real estate attorney. A financial advisor can take a more holistic look at your finances. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Estate planning can be a challenge, and bad decisions can be costly. If you’re creating your own estate plan, read this guide on the typical dangers of DIY estate planning.
©iStock.com/wilpunt, ©iStock.com/courtneyk, ©iStock.com/jeffbergen