Does a Trust Need an EIN for Tax Purposes?

A trust can be an important piece of an estate plan. Whether you are creating a trust or administering one as a trustee, it is important to understand whether and when you need an EIN.

In North Carolina, most revocable living trusts do not need a separate EIN while the grantor is still living. However, a separate trust EIN is typically required once the trust becomes irrevocable. This often occurs at the grantor’s death, if the grantor becomes incapacitated, or if the trust is created in a way that trust assets are not treated as the grantor’s for tax reporting purposes.

Key Takeaways

• Most revocable living trusts do not need a separate trust EIN while the grantor is alive and the trust remains revocable.
• Once the trust becomes irrevocable, often at the death or incapacity of the grantor, the trust requires a separate trust EIN.
• A trustee can apply to the IRS for a trust EIN online or by mail.
• Once the IRS issues a separate trust EIN, it can and should be used for all trust-related activities.

What Is an EIN and What Does It Matter for Trusts?

An Employer Identification Number (EIN), also known as a Tax Identification Number (TIN), is issued by the IRS to identify a tax-paying entity that is not an individual. The EIN is a unique nine-digit number that functions much like a Social Security Number does for an individual. However, an EIN applies to non-individual entities like businesses, trusts, and estates. The trust uses the EIN for tax reporting and financial purposes, such as when filing tax returns, reporting income, or managing trust accounts.

A trust generally needs a separate EIN when the grantor ceases to control trust assets and the trust is treated as a separate tax-paying entity.

A Revocable Living Trust Usually Does Not Need an EIN

When the grantor is still alive and the trust is revocable (i.e., the grantor is also serving as the trustee and can make changes to the trust and add or remove assets from the trust), an EIN is generally not required. Trust income is reported under the grantor’s Social Security Number.

An EIN Is Typically Required When a Living Trust Becomes Irrevocable

Typically, a revocable trust needs a separate EIN when it becomes irrevocable, which often occurs at the grantor’s death or if the grantor becomes incapacitated. Once the trust becomes irrevocable, it operates as a separate, tax-paying entity and requires its own EIN. which the successor trustee will need to file fiduciary income tax returns. When the triggering event occurs, often the death or incapacity of the grantor, the successor trustee is responsible for requesting a separate trust EIN from the IRS.

An Irrevocable Trust Created During the grantor’s Lifetime Requires an EIN

In some situations, it may be advantageous for the grantor to create an irrevocable trust during their lifetime, such as a Medicaid asset protection trust, certain charitable trusts, or a trust to protect assets from creditors. In these situations, the trust is a separate, tax-paying entity from its inception and will require a separate EIN.

How to Apply for a Trust EIN

Once you determine that you need a separate trust EIN, whether because of the death or incapacity of the grantor or because the trust was created in a way that trust assets are not treated as the grantor’s, the trustee or successor trustee will need to apply to the IRS for a trust EIN.

The fastest and easiest way to obtain a trust EIN is to apply online. Most applicants can receive a trust EIN immediately after filing. You can also apply for a trust EIN by mail.

Before applying for an EIN, be sure you have key details about the trust, including:

• The legal name of the trust
• The name and SSN of the trustee
• The trust’s mailing address
• The date the trust was created

Having this information readily available will help ensure a smooth and accurate application.

Using the Trust EIN

Once you receive the trust EIN, you can use it for all trust-related activities, such as opening a bank account or investment account in the name of the trust, updating existing accounts to reflect the trust’s EIN, and ensuring trust income is reported under the EIN when filing taxes. Once issued, the trust EIN does not expire and will remain permanently assigned to the trust for all future trust-related financial and tax activities.

How an Estate Planning Lawyer Can Help

If you are trying to determine whether a trust needs a separate EIN, the estate planning attorney team at Carolina Tax, Trusts & Estates, a Department of Van Camp, Meacham & Newman, PLLC can help. We assist North Carolina families with creating customized estate plans that protect their financial future and well-being. Contact us today to schedule a confidential consultation to discuss your situation and how we can assist you.