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Old 01-22-2014, 12:41 AM
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Trust EIN

A revocable trust splits into a marital trust and a family trust at the settlor's death (making it irrevocable as I understand it). When applying for an EIN for the trust on the IRS website, the following choices of the type of trust has to be selected:

Bankruptcy Estate (Individual)
Charitable Lead Annuity Trust
Charitable Lead Unitrust
Charitable Remainder Annuity Trust
Charitable Remainder Unitrust
Conservatorship
Custodianship
Escrow
FNMA (Fannie Mae)
GNMA (Ginnie Mae)
Guardianship
Irrevocable Trust
Pooled Income Fund
Qualified Funeral Trust
Receivership
Revocable Trust
Settlement Fund (under IRC Sec 468B)
Trust (All Others)

Would the choice be Irrevocable Trust, Revocable Trust, or All Others?
IRS also asks if the trust is filing as an Estate under Sec. 645. Can someone explain Sec. 645 and when one should select it?



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Old 01-23-2014, 02:32 AM
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Originally Posted by FBN2014 View Post


#1;A revocable trust splits into a marital trust and a family trust at the settlor's death (making it irrevocable as I understand it).



#2;When applying for an EIN for the trust on the IRS website, the following choices of the type of trust has to be selected:

Bankruptcy Estate (Individual)
Charitable Lead Annuity Trust
Charitable Lead Unitrust
Charitable Remainder Annuity Trust
Charitable Remainder Unitrust
Conservatorship
Custodianship
Escrow
FNMA (Fannie Mae)
GNMA (Ginnie Mae)
Guardianship
Irrevocable Trust
Pooled Income Fund
Qualified Funeral Trust
Receivership
Revocable Trust
Settlement Fund (under IRC Sec 468B)
Trust (All Others)

Would the choice be Irrevocable Trust, Revocable Trust, or All Others?



#3;IRS also asks if the trust is filing as an Estate under Sec. 645. Can someone explain Sec. 645 and when one should select it?
#1;a Revocable Living Trust, also called a Revocable Trust, Living Trust or Inter Vivos Trust becomes a irrevocable trust at the grantor’s death.
#2; If you become successor trustee prior to the death of the grantor (or due to incapacitation or disability), then you will not need to obtain an EIN for the revocable living trust. The grantor will continue to report all of the income and expenses of the trust on his or her individual tax return. Since the grantor dies and the trust becomes irrevocable, you will need to complete the application for an EIN as soon as possible so you can properly report all post-death transactions under the trust EIN. As said, the trust was grantor trust, I mean revocable trust, however, now it has become an irrevocable trust; the trust becomes irrevocable sincethe grantor no longer has the capability to revoke it. However, in the immediate aftermath of the grantor’s death, revocable and irrevocable trusts are handled differently. Although revocable living trusts are legal entities under state law, the IRS does not regard the grantor and his trust as being separate entities because his ability to revoke the trust means that he has control over the trust assets. Therefore, he andhis trust both file taxes under his SSN during his lifetime.An irrevocable trust, on the other hand, must have its own TIN, I man EIN, since he does not have direct control of the trust's assets. When he dies, an irrevocable trust continues to function as before in terms of taxation, but the successor trustee of a revocable trust has to apply for a TIN.Revocable living trusts become irrevocable when the grantor or settlor -- the person who created the trust -- dies. Only the grantor can revoke the trust, so death makes changes impossible.
A legal trust that is not a grantor trust is a separate entity that can incur its own tax liabilities. It is therefore required to have its own Federal Employer Identification Number, also known as an FEIN or EIN. The process is fairly simply and can be done online, through the mail, over the phone or via fax. IRS Form SS-4 is used to apply for an EIN. A grantor trust is one in which income flows through to the grantor's individual tax returns, and therefore no tax ID is required. An irrevocable trust, in which the grantor forsakes all ownership interest in the estate's assets, is an example of a trust that will require a separate EIN.
IRS also asks if the trust is filing as an Estate under Sec. 645.


#3; You may obtain an EIN by completing Form SS-4 online at Internal Revenue Service. Although you are not required to do so, you should make an election under IRC Sec. 645 prior to obtaining the EIN in order to request the appropriate yearend of the trust. An election under IRC Sec. 645 treats a qualified revocable trust as part of the decedent’s estate for Federal income tax purposes. California follows the Federal election. This will generally simplify the administration of the estate and can provide several tax advantages, since the electing trust will follow the income tax rules for an estate rather than a trust for the first two years. The electing trust can select any fiscal year that falls within 12 months from the date of death. A trust that does not make the election must use a calendar year. For example, if the date of death is 9/10/2013, the latest fiscal yearend that you can select is 8/31/2014. You would not need to file fiduciary income tax returns until 12/15/2014. This gives you additional time to gather the necessary documents and make appropriate decisions. The electing trust also does not need to make estimated tax payments during the first two years.

If you will be unable to distribute the assets of the trust within two years of the decedent’s death, this election can result in a small administrative headache. The election is only valid for two years. At the end of the two years, the IRS will no longer treat the trust as part of the estate, and you will have to follow the income tax rules for trusts. The trust then would have to obtain a new EIN and revert to a calendar yearend. In the example above, if you did not distribute the trust assets by 8/31/2016, then you would have to file a short year trust return for the period from 9/1/2016through 12/31/2016.



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Old 01-25-2014, 04:53 PM
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Thanks for this detailed response. Excellent post. Are you an accountant, EA, attorney?



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