An Employer Identification Number (EIN) is a nine-digit number assigned to businesses and organizations like trusts for tax-reporting purposes. A trust is a legal entity that holds assets for distribution to its beneficiaries. Trusts can be established by a living person, or may be established once a person has died if their will states that a trust should be established.
Definition of a Trust
A trust administers property on behalf of a beneficiary. A trust is made up of four parts: a grantor, beneficiaries, assets and a trustee. The grantor creates the trust, the beneficiaries receive the income from the trust, the assets are all of the property in the trust and the trustee is the person who manages the trust and distributes the assets according to the terms of the trust. Trusts are required by federal law to obtain an EIN.
Definition of an EIN
An EIN identifies your trust as a unique entity in the eyes of the IRS. The number has the format "xx-xxxxxxx" and is used to report the trust's income and expenses at tax time. The EIN also can be used to open a bank account or apply for credit on behalf of the trusts. You may also need to supply the trust's EIN to state or local government officials for tax reporting or for necessary licenses.
How to Get an EIN
The IRS' preferred method of getting an EIN is through the online "EIN Assistant" website (see Resources). The free application walks you through the EIN process in an interview-style process. You will be asked to specify what kind of trust you are applying for, such as a bankruptcy estate, a custodianship or a guardianship. Once you have entered all of the information, the system will check your entries and issue you an EIN instantly. You also can call 800-829-4933 Monday through Friday from 7 a.m. to 10 p.m. local time, or fill out Form SS-4 and fax it to 859-669-5760 or mail it to: Internal Revenue Service, Attn: EIN Operation, Cincinnati, OH 45999.
When You don't Need an EIN
In general, your trust needs an EIN. However, there are exceptions, including exempt organization business income tax returns, IRAs and exempt certain grantor-owned revocable trusts. Of these three categories, the only one that is likely to apply to a family trust is the exempt certain grantor-owned revocable trust category. A revocable trust can be terminated or modified during the grantor's lifetime.