People often think that applying for a Federal Tax ID number, also known as Employer Identification Number or EIN, is only for business people who have employees. True enough, an EIN is a nine-digit number that helps the Internal Revenue Service (IRS) to identify a business entity and monitor the wages and other payments made by the entity. But getting a tax ID number is not just for business owners, you also need to get a tax id for trust.
What Is a Trust?
A trust is a legal condition that enables the trustee or a third party to manage or oversee the property on behalf of the owner. Through a trust, you can achieve protection from estate taxes and avoid probate, or the process of settling an estate.
Trusts allow greater power in the management of assets and wealth. It also gives protection of the legacy from heir’s creditors and increases privacy since the assets can pass outside of public probate.
A trust’s main parts include:
The grantor, or the person who creates the trust, determine who gets the profit from the interest by setting legal rules and stipulations.
Do All Types of Trust Need an EIN?
There are two types of trusts: revocable and irrevocable. Each of these has a corresponding Federal Tax ID. A revocable or living trust has provisions that may be altered or canceled by the grantor. It uses the social security number of the grantor for identification. Its income is also reported on the grantor’s tax return.
Meanwhile, an irrevocable trust cannot be modified or terminated without the consent of the beneficiary. This type of trust has an alternate Federal Tax ID number and all irrevocable trusts must have an EIN.
When a business owner dies, the estate executor or the administrator of the assets should secure an estate tax ID to report wages or pay any taxes due. Applying for a new EIN is quick and easy with https://www.irs-ein-tax-id.com/.