New York Estate Planning & Elder Law Blog
Trusts are common estate planning tools in which a person can transfer ownership of assets to the trust. While this person is alive, they retain control over the assets in their life. Upon their death, the assets are distributed to the beneficiaries named in the trust.
While the Person is Alive
A revocable trust uses the social security number of the person who created the trust. A revocable trust does not have to file its own tax return. All income is, instead reported in the same manner as any other income on the tax return of the trust creator. People who jointly own a revocable trust, such as a married couple, both hold the power to revoke the trust. This means that either person’s social security number can be used. Couples who file tax returns separately must be careful. The person who reports the income on their personal tax returns should be the same as the person whose social security number is used.
Irrevocable trusts cannot use the social security number of the trust creator. Instead, a taxpayer identification number from the IRS is required. It is at this point that the trust must file its own tax returns.
After the Person is Deceased
Once the creator of the trust passes away, the trust becomes irrevocable and a taxpayer identification number (“TIN”) is required. For a married couple with a joint trust, when one of them passes away all or part of the trust may become irrevocable even though the other spouse is still alive. If any portion of the trust becomes irrevocable, it must have a TIN.
Applying for a TIN
Taxpayer identification numbers are often applied for online via the IRS website. This application can be submitted by a trustee or a professional, such as a tax advisor or attorney. In order to finalize this application, the person filing will be required to provide the name of the trust, the trustee’s name, type of trust, and the date the trust was funded. The wording in this application can be tricky for those unfamiliar with trusts so consider consulting with a professional.
Once a Taxpayer Identification Number is created, this becomes the number that must be used on all accounts titled in the name of the trust. This number is, as the name suggests, how the IRS will identify the trust in the future.