Do I Need a Tax Identification Number for a Parent’s Trust?

Estate Planning Attorney Assisting Long Island Families with Trusts for Parents

parent's trustAfter a loved one passes away, you may be assigned the role of executor of the estate. When there is a trust involved, you might have questions about how to handle the taxes, and whether you will need to receive a TIN or use the TIN already associated with that trust.

Naturally, it is best that you consult with an estate planning attorney. An estate planning and living trust lawyer can assist you with asset distribution and with following the rules of the trust, and can ensure that you comply with all state and federal tax codes related to trust administration.

Do You Need a Tax Identification Number for a Trust?

In the case of an irrevocable trust, you will not use your deceased loved one’s Social Security number for tax purposes. Instead, you will obtain a tax identification number (TIN) for the trust. The reason for this is because from the date of the parent’s death, you distribute trust funds in accordance with the guidelines of that trust. Any income that your parent’s trust earns after that must be reported under a new TIN.

An irrevocable trust activates upon a loved one’s death; this means that, as the executor, you must file a 1041 tax return with the IRS if that trust earns more than $600 in the taxable year. Also, your TIN is required so that you can open a bank account in the name of your parent’s trust, which you can then use to consolidate all assets associated with the trust, pay trust-related expenses, and distribute assets accordingly.

Do Not Distribute Assets Without a TIN

Executors often make the mistake of distributing assets without obtaining a TIN, in the hopes that they can bypass the income and tax return requirements. However, no trust should be distributed right away. While it helps to bypass taxes, the issue at hand is actually that of expenses. Most trusts are set up to handle all expenses associated with the trustee’s estate, and not all expenses are apparent immediately after death.

A good estate attorney will recommend leaving the trust account open for a few months (sometimes for a year, depending on the complexity of the case) to ensure all expenses, medical costs, and other debts are paid. Then, the trust funds can be used to pay any tax liability associated with that trust.

If a trustee distributes all of the trust’s assets before paying taxes and other associated debts, then the trustee is personally responsible for paying that liability, or he or she must approach the beneficiaries of the trust and request the funds back to pay debts – this can create a whole host of legal issues.

Obtaining an EIN for a Trust is Easy

An EIN is the number you will need for your trust, which is the same number used as a TIN. While you might refer to it as the TIN or your tax return will request the TIN, this number is actually an Employment Identification Number (EIN) given to you by the IRS.

  1. Gather all information necessary for the Employment Identification Number (EIN) application, including information about the name of the trust, the trustee’s name, the mailing address, the grantor’s social security number, and the date when the trust was funded.
  2. Use Form SS-4 from the Internal Revenue Service. It is available for free from the IRS website.
  3. Complete SS-4 following all directions listed in the instruction section. You will submit the form for your EIN, which is the same number used as a TIN for trusts.

For faster processing, you can complete Form SS-4 online through the IRS.gov website.

Speak with an Estate Attorney for Assistance Distributing Trust Assets

Sometimes, it is best to contact an estate lawyer before distributing trust assets. Trusts are complicated, but through legal assistance, we can ensure that you obtain EIN numbers, distribute assets, and pay all liabilities properly before distributing assets to beneficiaries.

For assistance with your loved one’s trust, contact the Law Office of Andrew M. Lamkin at 516-605-0625 or contact his office online to schedule a free, no-obligation consultation.

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