As long as you are living, your Revocable Living Trust does not have a separate tax identification number (TIN) or EIN and you do not need to file a separate trust tax return. The Internal Revenue Service (IRS) prefers that you use your own Social Security number. You should report all of the income generated by trust assets on your personal IRS Form 1040. If a bank or other financial institution asks for the EIN (employer identification number) or TIN for your Revocable Living Trust, give them your social security number. During your lifetime, your trust is revocable and you, the Grantor, are paying the taxes on the property in the trust. The tax rate for an individual is less than the rate charged to a trust. Additionally, filing taxes through your personal return helps to keep tax returns simple.
If your Revocable Living Trust is held jointly (you and a spouse or partner), simply select one person’s Social Security number as they one you’ll use. So long as you file a joint tax return, the social security number used won’t affect you.
There may be times where a separate tax id is necessary or advisable for a revocable trust; however, it is important to understand the potential tax ramifications. If you think having a separate tax id is the right decision for your trust, make sure to discuss the the matter with a professional, either your CPA or attorney to be sure there are no unintended consequences.
When you die, your trust becomes irrevocable for tax purposes. It may split into multiple trusts, each of which may be treated as a separate taxable entity for income tax purposes. Each of these irrevocable trusts will apply to receive their own TIN, which will come from the IRS and is not the beneficiary’s social security number. An irrevocable trust will have to file a separate tax return if the trust generates more than Six Hundred Dollars ($600.00) in gross income in a year.
For help understanding your Revocable Living Trust, call us today at (678)781-9230 to schedule an appointment.
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This Blog/Web Site is made available for educational purposes only as well as to give you general information and a general understanding of the law, not to provide legal advice. By using this blog site you understand that there is no attorney client relationship between you and Grissom Law, LLC.