Does an Irrevocable Trust Need a Name?

by Mary K. Hogan ; Updated July 27, 2017
The trustee signs a tax return on behalf of an irrevocable trust.

Trusts have been aiding individuals to safeguard and control the distribution of estate assets to their heirs for centuries. According to Lawrence M. Friedman in his book, "Dead Hands -- A Social History of Wills, Trusts, and Inheritance Law," in the United States alone, some $41 trillion will pass from the dead to the living in the first half of the 21st century. An irrevocable trust is a separate, taxpaying entity in the eyes of the IRS, and like any taxpayer, it does need a name.

Purpose

The primary purpose of an irrevocable trust is to transfer tax liability from the maker (or grantor) of the trust, to the trust itself. Depending on state statutes and the language in the document governing a trust, the trust may receive a more favorable estate tax, or death tax, rate. Transferring assets out of the estate of the individual who originally owned the assets into an irrevocable trust has the effect of reducing the value of the grantor's estate to an amount that is exempt from federal estate taxes.

Grantor Vs. Non-Grantor Trusts

According to the Internal Revenue Code, a grantor trust is any trust over which the grantor or other owner retains the power to control or direct the trust's income or assets. In general, a grantor trust is ignored for income tax purposes, and all of the income, deductions, etc., are treated as belonging directly to the grantor. A non-grantor trust is irrevocable, and the grantor relinquishes all rights and powers over the income and assets in the trust.

Taxpayer ID

A revocable, grantor-type trust does not require an employer identification number (EIN) or tax identification number (TIN); all income is taxable under the grantor's Social Security number. A valid non-grantor-type trust requires a TIN in the name of the trust entity. The trustee will need a new EIN or TIN if a revocable trust changes to an irrevocable trust (for example, at the death of the grantor).

Naming Conventions

The name of an irrevocable trust is determined at the time an attorney draws the trust agreement on behalf of the grantor. The typical naming convention for an irrevocable trust includes the name of the grantor, the date the trust was created, and the name and designation of the trustee. For example, an irrevocable trust created by Jane Z. Doe on July 4, 2010, would be "The Jane Z. Doe Irrevocable Trust Dated July 4, 2010, XYZ National Bank, Trustee."

About the Author

Mary K. Hogan currently holds a Certified Business Analysis Professional certification from the International Institute of Business Analysis and has held the designation of certified trust and financial analyst. Hogan has been a contributing writer online since 2009 and is currently working on her third children's book.

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