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.
