A New Tax Identification Number is Required for Revocable Living Trust After the Trustmaker’s Death

Many of our clients choose to create revocable living trusts as their primary estate planning vehicle to state their wishes for the management of their assets during life and what will happen to the assets after their death. Creating a revocable living trust establishes a separate legal entity that owns the property that is funded into the trust. In general, trusts are subject to taxation as separate entities and as a result they need to have their own identification number for tax purposes. However, for a revocable living trust a separate tax identification number typically is not necessary during the grantor’s (“trustmaker’s”) lifetime. Revocable living trusts are treated as what the IRS calls “grantor” trusts, which allows them to use the Social Security number of the creator or grantor of the trust. Any income or deductions that are attributable to the trust simply get added to the grantor’s individual tax return. This is the case for as long as the trust continues to be a grantor trust for tax purposes.

After the death of the person who created the revocable living trust, the nature of the trust changes. The successor trustee of the trust will need to follow some administrative steps in order to treat the trust properly for tax purposes. One of those steps involves obtaining a tax identification number for the trust. The reason why the trust will need a tax identification number after the death of the grantor is that at that point the trust is irrevocable and no longer meets the grantor trust rules and therefore can no longer use the deceased grantor’s Social Security number. Going forward, the trust must be treated as a separate taxable entity. A trust is required to file a tax return if the trust earns more than $600 of income in a year and getting a tax identification number is necessary in order to file.

Jon