ein number for trust

How to Get a Tax ID Number for a Trust

Setting up a trust fund means going through several processes, which also involve attaining a tax ID number. This confuses many and the most frequently asked question when it comes to setting up a trust fund is how to get a tax ID Number for a trust. But before we move on, let’s start from the very beginning. What is trust after all? What are its kinds and how would one go about setting it up? Is it something which a person can deal with on their own or would require assistance from professionals? Let’s educate us on everything related to a trust, tax IDs and how to get a tax ID number for a trust:

If you need help getting a tax id number for a trust call us at 407-344-1012, or email us at info@freedomtaxfl.com.

What Is Trust?

Believing in someone’s truthfulness, ability and reliability is one way of defining trust. The other definition is more financial in nature, and that is what we are dealing with here. In legal terms, a trust is a pact that involves naming a beneficiary for a property which shall be held for their benefit for a particular period of time. However, there are a variety of kinds of trusts and each one of them involves knowing how to get a tax ID number for a trust, especially the ones where the trust is not a grantor trust or those trusts where the instigator is more than one person.

To help you get lay of the land and to understand when you need to learn how to get a tax ID Number for a trust, allow us to define what a grantor trust is. It is a trust where the grantor and the beneficiary are one and the same person and in this case, they have complete control over the fund. A separate tax identification number is not required in a grantor’s fund because only the person dealing here can use their own social security number to get reports of the proceedings of the trust income.

How to Operate Trust Funds

For those who are entirely new to the concept and have yet to understand how one can set up a trust fund and how the system really work, here’s an elaborate description. A trust fund is basically what a person leaves for others upon his death, but he does so while he is living. The process in real time is a lot less depressing than how this sounds, but you get the point.

If a person with ample earnings has enough to take care of his children, a charity, or any cause they hold dear to them, they set up a trust fund. All their hard earned money goes to the people or causes they have declared to be the beneficiary. However, the beneficiary cannot just go to the bank, attain access to their trust fund, and spend it like the spendthrift they are. So, how does this sorcery works? Most of the times, a very financially successful person aims to leave something behind for people who are not as savoir-faire with their money or for those who are too young and unable to – for any reason –fend for themselves. For a purpose like this, most people set up an irrevocable trust fund where a certain condition is put into place and the beneficiary can only use that money when he reaches that condition. This way, the money goes on for generations and there is no risk of a very reckless next of kin draining it all away on useless expenditures. Some of these conditions are not even bound by time and the beneficiary might be able to use the trust fund even when the beneficent is alive. This was just one kind of trust fund. Here are some more.

Kinds of Trust Funds

We might need to learn how to get a tax ID Number for a trust but it largely depends on the kind of a trust fund we are setting up. As we have already established, a beneficent status of life and death matters little when it comes to trust funds. The trust can be set up by a person and can survive even when the person is dead. At times, the trust fund is opened after the person has passed away but the contents of their will suggest an initiation of a trust fund.

The rules and limits of trust funds are sort of fixed. Once the trustee has placed his assets in a trust fund, they are no longer his and they do not even completely belong to the beneficiary. In fact, the trust fund becomes subject to the set of instructions, rules and limits that has been left for the trust. From a number of versatile kinds of trust funds, we are touching bases with the most fundamental and common ones.

•   Revocable Trusts:

A revocable trust, as the name suggests, is subject to revocability. These kinds of trusts are created by the beneficent in his lifetime and he has the right to do anything he wants as long as he is alive. This means that the trust maker can alter it, change it, remove it, or do whatever he wants to do with it with no strings attached. A revocable trust is also called a living trust for the reason explained earlier. It works in a way where the trustee transfers his property to a trust and has the right to remove this ownership anytime he wants during his lifetime. Revocable funds are mostly preferred because of the ease of dealing with it during the lifetime of the trust maker. Even after his death, the revocable trust doesn’t have to go through the tiring and time consuming process of probation. If the title of the property is in the name of the trust, it is very obvious who it is for. Also, since it proves the fact that the trust maker has done so in his lifetime, it further goes on to prove the authenticity of the trust fund.

·      Irrevocable trust:

An irrevocable trust is the complete opposite of a revocable one. In this trust, no one can alter, revoke, modify or bring any changes in the fund. What’s done is done stands true for this type of trust fund. Not even the beneficent can make any changes to the trust once he has transferred the title of property to someone else.

The trustee can, however, put on certain conditions on usage of this trust fund. It can be for health issues, it can be a college fund for children, and can only be used for that purpose and nothing else or it can be accessed when the beneficiary comes to a certain age. By setting up this fund, the beneficent also gets saved from paying taxes generated from this property. Since it is no longer under the ownership of the trustee, it is not subjected to tax. While trusts are set up for others, many people opt for an irrevocable trust to avoid payments of taxes and removing the property from their income tax bracket.

·      Asset Protection Trust:

An asset protection trust is a smart move on behalf of the entrepreneurs or just about anyone. This Asset protection trust, as the name suggests, is for the sole purpose of protecting the assets from the sharp approaches of the creditors. Most people set up this type of trust fund outside their country, though it is not a necessary constraint. This asset is irrevocable in nature but only for a temporary period of time. After the beneficiary is sure that the protected asset is no longer suspected to any danger from the creditors and as soon as the agreed term has reached its expiry period can the beneficent bring the protected asset back under their ownership and have complete control over the asset and do with it as they please.

·      Charitable Trust:

Charity trusts are quite simply for charity purposes. These trusts do not go to an individual and neither does it keep an asset for the beneficent himself. The charitable trust is set up by a philanthropist for the sole purpose of benefiting a certain charity or public at large. However, as humanitarian as this trust fund sounds, most people set this one up as a clever means of financial planning. To avoid estate and gift tax, most people learn how to get a tax ID for a trust and set up a charitable trust fund during their lifetime, It benefits them in many ways, most of all in avoiding hefty tax amounts. Moreover, upon making such a large charitable trust fund, the beneficent is also awarded for their altruism.

·      Special Needs Trust:

Special needs trust is set up for a person who is to receive benefits from the government so that they do get it without being barred from it. While most think that this fund is shady, it is completely and rightfully legal under the social security rules. However, it is not under the control of the beneficiary. They have no right over the trust fund and they cannot revoke it under any circumstances. The frequency and the amount are solely based on the government. There are rules that might declare the beneficiary ineligible for receiving the fund. These types of funds are only for meeting the needs of disabled people, especially when they have no other source providing for them.

·      Spendthrift Trust:

A spendthrift trust fund is the kind of fund that is made just to keep a spendthrift beneficiary from spending all of his money. The beneficiary of a spendthrift trust cannot sell or secure interests of the trust. A spendthrift trust also helps the beneficiaries by protecting their funds from the creditors until a time comes when the fund is distributed among the beneficiaries, after which it is not longer on protection.

If you need help getting a tax id number for a trust call us at 407-344-1012, or email us at info@freedomtaxfl.com.

What is a Tax Identification Number?

A tax ID number is a 9 digit number used by the Internal Revenue Service and responsible officials for tracing down individuals and their tax histories.

Kinds of Tax Identification Numbers

Before you learn how to get a tax ID number for a trust, you need to know that tax Identification number is not of one kind. There are several kinds and forms of tax Identification numbers available for use. Following are the most common ones:

  • Social Security Numbers:

This is the most fundamental tax identification number and must be owned by every US citizen.

  • Employee Identification Numbers:

An EIN is for corporations, firms, and entities. The government uses these numbers to identify these businesses and to track them down. It is needed by these firms in order to report their tax incomes.

  • Adoption Tax Identification Numbers:

This tax number is for parents who have adopted a child or children and for some reasons in which they are unable to apply for a Social Security Number (SSN). The child must be a citizen of the US.

  • Individual Tax Identification Number:

Those who are not qualified for social security numbers and are non-residential aliens must apply for this Identification number.

  • Preparer Tax Identification Number:

Preparer Tax Identification Number, as the name indicates, is a must have for preparers.

How to Get a Tax ID Number for a Trust:

By now, we should have become well-versed in what a trust fund is, how many kinds of them there are, and which one of them involves learning how to get a tax ID number for a trust. Apart from the grantor’s trust and in cases where it is only created by one person, every other kind of trust fund needs getting a federal tax Identification number. It’s time we finally learn how to get a tax ID number for a trust. The following are the steps involved:

1.   Gather Information:

An EIN number is a 9 digit number and can only be assigned by the Internal Revenue Service to an individual or a business for the purpose of Identification. You don’t need to apply first and decide later. For instance, if you are filling up an SS-4 form, you need to know everything from the trust’s name, trustee’s name, social security numbers, and types of trust to the mailing address. There is some information that might need time to collect; so, make sure you have every bit of information that a form requires before starting to fill it up. You cannot just write the name of any random trust type. You need to do your homework and research before deciding. The first step in knowing how to get a tax ID number for a trust involves having detailed information in your hands. Here are some of the important ones you might need:

  • Names of the responsible parties alongside their social security number or business EIN (If available)
  • Gather the accurate mailing address, contact informational and the location of the trust.
  • Note the correct date when the trust was funded.

2.   Get the Form:

The next step involves getting your hands on the SS-4 form. Thanks to the rapid development of technology, no longer do you have to cover long distances to obtain just a form. Put it on the website of IRS on your search bar, search for the form, and download it. If the local IRS office is near you, just go and get it.

3.   Be Prepared:

If you opt for applying online, make sure you have everything before you. The form has a countdown of 15 minutes. If the time finishes, the form will close itself and all the information you have entered will be lost. So, make sure you have everything you need in front of your eyes and you don’t have to do anything else when in the middle of filling the form.

4.   Fill the Form:

Here’s your guide to filling the EIN form step by step:

  • Visit the IRS website and search for the EIN application in the search bar. From your results, click on the first one. Then, click on the link apply online and then, begin filling your application for an EIN number.
  • The form will ask you for your purpose of applying for the EIN number. Since you are applying because of a trust, mark that. Next, mark the trust (All Others) options and continue with your form filling.
  • Once you are sure you have filled all the right information, review it once again and the click on the continue button.
  • Keep on answering questions carefully until you reach the last page. Make sure you have entered all information correctly regarding the trust, trustee, names, addresses and dates regarding the trust fund.
  • Select whether you’d like to receive your EIN number online or would prefer getting it through mail. The online option is faster and mailing may take as long as one month.
  • Once you have received the EIN number, print copies and keep it someplace safe.

5.   Make Sure You Are Eligible To Apply:

If you are not a grantor, trustee or beneficiary, you can not apply for the EIN number unless you get permission from one of them. The permission must be in written form.

6.   Apply Early:

Don’t procrastinate and don’t delay getting the federal EIN number. As soon as you have learned how to get a tax ID number for trust, begin collecting information and apply. If you apply early, you’ll have a tax ID number by the time you are ready to setup the trust.

Knowing how to get a tax ID number doesn’t make the process easier or faster easier; it just makes you more careful and allows you to save time by preventing you from doing something wrong.

If you need help getting a tax id number for a trust call us at 407-344-1012, or email us at info@freedomtaxfl.com.

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