Because the Internal Revenue Service (IRS) doesn't consider a grantor-owned revocable trust to be a separate taxable entity from its grantor, such a trust does not require an employer identification number (EIN) as long as its grantor is alive and well. However, the IRS will require a revocable trust to obtain an EIN if the grantor dies or become incapacitated. The IRS also requires revocable trusts that are not grantor owned to apply for this number.
Revocable Trusts and EINs
A revocable trust is a separate legal entity a grantor creates to hold assets until after his death. Placing the assets in a revocable trust allows them to pass directly to the grantor's heirs without going through probate court. A revocable trust qualifies as grantor owned if the grantor controls the trust and receives all of its income while alive. An EIN is a federal tax identification number that the IRS uses to identify business entities for tax purposes.
Death of the Grantor
Revocable trusts that are not grantor owned must have EINs both before and after the grantor's death. A grantor-owned revocable trust becomes irrevocable upon the death of the grantor, at which point it must obtain an EIN. The successor trustee can apply for this number after assuming his duties.
If the grantor of a grantor-owned revocable trust becomes incapacitated and is no longer able to serve as the trustee, the successor trustee assumes the duties. At this point, the IRS no longer considers the grantor and the trust to be the same taxable entity because the grantor is not controlling the trust's affairs. For this reason, a grantor-owned revocable trust must apply for an EIN when its grantor becomes incapacitated.
Obtaining an EIN
To obtain an EIN for a trust, the trustee must submit an application to the IRS. Trustees can submit applications online, by telephone or by fax. To complete the application, the trustee must list the responsible party's name and contact information and the legal name of the trust. He must also fill out basic information about the trust, such as its type and date of creation.
- IRS.gov: Employer Identification Numbers (EINs)
- IRS. "Abusive Trust Tax Evasion Schemes - Questions and Answers: Basic Trust Law." Accessed June 26, 2020.
- Commonwealth Financial Network. "Estate Planning With Intentionally Defective Grantor Trusts." Accessed June 26, 2020.
- IRS. "184.108.40.206 (09-16-2013) Trusts - Intentionally Defective Grantor Trust (IDGT)." Accessed June 26, 2020.
Amanda McMullen is a freelancer who has been writing professionally since 2010. She holds a bachelor's degree in mathematics and statistics and a second bachelor's degree in integrated mathematics education.