Does a Special Needs Trust Require an EIN?

An employer identification number (EIN), or a federal tax identification number, is a 9-digit sequence of numbers that identifies a business or trust for taxation purposes. It is usually assigned in the format XX-XXXXXXX.

The Internal Revenue Service acts as the governing body responsible for issuing EINs. An EIN must be acquired from the IRS when some trusts are created. You must obtain the number from the IRS when a special needs trust is established because a special needs trust is an irrevocable trust and irrevocable trusts must have an EIN.

A special needs trust is set up with the intent of distributing assets to a disabled beneficiary. Establishing a special needs trust allows a disabled person to receive assets from an inheritance without interrupting their Social Security and Medicaid benefits.

A disabled person cannot have countable resources worth over ​$2,000​. Anyone who inherits more than that amount would likely have their Social Security and Medicaid benefits reduced. Eventually, their benefits may be eliminated.

But a special needs trust can provide a beneficiary with funds to purchase a home and money to pay for medical and other health-related expenses without compromising their government benefits.

There are two types of special needs trusts. The first-party trust is one that's created by the person with special needs, who transfers their assets into the trust to benefit them. They'll end up as beneficiaries of their own trust.

The other type of special needs trust is the third-party trust. This kind of trust originates from someone other than the beneficiary. If you have a child with special needs and you worry about their future, you can transfer some or all of your assets into a trust fund to be used on their behalf during your lifetime and after your death. The earnings from the trust can then be used to help them out without compromising their government benefits.

But not everyone can enjoy the special needs trust distributions while also getting government benefits. Beneficiaries of special needs trusts must also typically meet the Medicaid and Social Security requirements for disability set by the government. The criteria can vary depending on the benefits you or your loved one will receive.

Visiting the IRS website or calling the IRS Business and Specialty Tax Line is the fastest method to obtain an EIN for a special needs trust. An authorized individual must provide their name, address and Social Security number to acquire an EIN for a trust.

The EIN application must indicate the reason for applying for an EIN and the main activity of the special needs trust. The IRS assigns an EIN to the trust at the conclusion of an online or telephone interview.

The IRS allows a special needs trust to acquire an EIN by mail or by fax. It takes up to four weeks for a trust to acquire an EIN by mail. Form SS-4 can be printed from the IRS website and mailed to the appropriate IRS service center, which varies based on the trust's location.

A special needs trust that applies for an EIN by fax will receive an EIN within four business days, as long as the EIN application contains a return fax number.