Sunday, May 13, 2012

Applying for a trust's EIN

We routinely receive practical questions.  I thought that I'd take an opportunity (composed several weeks ago) to explain one:  How do I obtain an employer (or taxpayer) identification number (EIN or TIN) for a trust?  This is obviously only an overview.  For an excellent, detailed article on this subject, I'd recommend "Grantor Trusts and Income Tax Reporting Requirements: A Primer" (March/April 2002 issue of Probate & Property (ABA RPTE Law Section)), written by Jonathan G. Blattmachr, Esq. and Bridget J. Crawford, Esq.

Grantor trusts, which generally include revocable trusts as well as some irrevocable trusts, may use an individual's Social Security number (SSN).  However, many institutions, including banks, life insurance companies, and financial services companies, either don't understand this or have a policy to the contrary.  They seem especially convinced that any irrevocable trust must obtain its own EIN.  That's simply not true.  Even so, they won't do what you're asking unless you furnish one.

The most efficient way to obtain an EIN is via the Internal Revenue Service's well-designed online system.  Unfortunately, third-party designees (TPDs), such as accountants and lawyers, can't and really shouldn't obtain EINs on behalf of their clients because legally an IRS Form SS-4 (“Application for [EIN]”) must be completed and submitted to the IRS prior to the online application.  That makes the online system a redundant one.

However, grantors (a.k.a., settlors or trustmakers) and trustees may use the online system.  For example, for an irrevocable life insurance trust, you'd select "Trust" and then "Irrevocable Trust."  Next, you'd input the individual grantor's name (labeled the "Responsible Party" here) and SSN, the trustee's name and address, the trust's name, and the funding month.  You'd generally select "No" when asked if the trust will pay employees within the next year.  Then you’d download the Adobe Acrobat file, which is named something like “CP575Notice_1234567890123.pdf.”

I would offer a couple of practical tips.  First, you sometimes need to abbreviate the name of the trust because the full legal name might not fit.  For example, the full legal name of my trust might be the “Jason E. Havens 2012 Irrevocable Trust.”  However, I might abbreviate the name to the “Jason E. Havens 2012 Irrev Tr.”  Second, you can't use most punctuation, including commas and periods.  Nevertheless, the IRS really doesn't care about that anyway for this purpose.

Besides the article above, the IRS’ “Instructions for Form SS-4” are the official guidance on these issues.  I hope that this helps.