Do I need to get a Tax ID Number for my new Trust?

This question comes up all of the time.  The answer really depends on the type of trust that you have.  As a general rule, if you have a Revocable Trust or a Living Trust AND you are serving as your own trustee, then you can use your social security number for the Trust’s tax identification number.  In other words, when you retitle assets into the name of your Trust, you can give your banker or financial advisor your social security number for the Trust’s id number. 

If your Trust uses for social security number, then you won’t need to file a separate trust return for the Trust each year.  All of the income from the Trust will go right on your personal return, just as it did before you formed the Trust.  It has become a common misconception that Revocable Living Trusts are administratively burdensome, in large part because they need separate tax returns.  This is not true!

Once you are no longer the trustee, then the Internal Revenue Code requires the Trust to have its own tax identification number (sometimes called a TIN or EIN – employer identification number).  In this case, a separate tax return may be required, along the Trust’s income may still pass to your return if you remain the beneficiary of your Trust.

While the rules regarding Trust tax returns are complicated, you can remember one simple rule for your Revocable Trust – If you are the Trustee of your own Revocable Trust, then you don’t need a separate tax id number.  If you are not the Trustee (regardless of whether you are the Trust’s beneficiary), you will need a separate tax id number.

Too complicated?  Give me a call, and I will walk you through it.

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