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What California residents need to know about getting a tax identification number

Inheritance Law > What You Need to Know About Getting a Tax Identification Number > California

How to Get a Tax ID Number for a Trust or Estate in California

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If you are serving as the executor or trustee of a deceased person's estate or trust, you are going to have to get a taxpayer identification number for the estate or the trust. You cannot use the deceased person's Social Security number, or use your own. There is one exception to this rule: if you are the surviving spouse, and everything is left to you either outright or in a revocable living trust, you can continue to use your own Social Security number for these assets, but that's because, essentially, they are your assets.

This ID number, called an EIN ("employer identification number"), is like a Social Security number for the estate or trust. You'll need it to open a bank or brokerage account, and it's what the bank or other financial institution is going to use to report the interest earned on those accounts until they are distributed to the estate's or trust's beneficiaries.

The easiest way to apply for an EIN is on the IRS website, www.irs.gov. The process just takes a few minutes and, when you are done, the site gives you the EIN that you'll use for the estate or the trust. If you don't have access to a computer, you can fax in an application to this number: (859) 669-5760.

When you apply online, the IRS's Online Assistant will ask you questions as you go through the application process. Most of them are straightforward enough, but a few can be confusing. The best way to use the system efficiently is to print out a paper copy of the SS-4 application form and fill it out first.

That way, you'll have all of the information already and won't have to stress about the Online Assistant crashing, or logging you out, while you are using it. Oddly, the SS-4 form and the Online Assistant differ slightly in the sequence of things that are required and even a bit in what they require--but if you fill out the paper version, you'll have all of the information that the online application requires.

Here's a list of the non-obvious questions and what to write down in the order that they come up when using the IRS' Online Assisstant:

1. What type of organization are you creating an EIN for? Here, choose "estate" if you are getting the number for a probate estate or an estate being distributed under the terms of a will. Choose "trust" if you are administering a trust.

2. If you selected "trust," the next question is "what type of trust?" Select "irrevocable" if you are administering a trust after a person has died.

3. Name of responsible party? Here, enter the name of the executor or trustee. The IRS wants to know who is responsible for paying the taxes due. Another way to think about this is that the IRS wants a live human being to go after if the estate or trust's taxes are not paid. You will need the trustee or executor's Social Security number as well.

4. Name of Executor? This question appears if you asked to create an EIN for an estate, not a trust. Here, enter the name of the executor named in the will.

5. Do you want to make a 645 Election? This question appears if you are getting an EIN for a trust, not an estate. It has to do with when you want to file tax returns for the trust. You have a choice: End the tax year 12 months after the person died, or stick with the calendar year, which ends December 31.

You can choose a non-calendar year only if you think the trust won't last more than two years. For example, if the person died in May, you could use April as the ending month (May through April would be the accounting year) or December as the ending month.

If you do want to end the tax year 12 months after  the person died, choose "yes." If you want to use the calendar year (in which case December will be the last month), then you don't make the 645 election.

Do you care? Maybe. Some accountants prefer using the ending month of the year in which the death occurred because it gives them 12 months to try and close the trust, and only one tax return to file. That return, called "a first and final," is due three and a half months after the close of the trust or estate's accounting year. (That's the same rule as trusts that use December as a closing month--those returns are due April 15th of the next year.)

Other accountants like to use December, because then all of the returns that they are preparing are due at the same time, which is April of the following year. This may mean that more than one trust return is filed, but that's okay.

If you aren't sure which month to use, don't make the 645 election; just use December as the closing month. You can always change your mind later, as long as you make the election by what would be the original due date of the first trust return, which is about 15 months after the date of death. That way, you'll have time to talk to your accountant first.

6. Trustee of Irrevocable Trust/Name of Executor. This is the same person that you selected as the "responsible party." In both cases, this is the person who is in charge of managing the assets (and paying taxes) until the trust or estate assets are distributed to the beneficiaries.

7. Are you a designated Third Party Designee?  Here, the Online Assistant is asking who is actually applying for the EIN. If you are applying for the EIN and are also the person who will be paying the tax (executor or trustee), then you are NOT a third party designee.

If you are getting the EIN for the executor or trustee, then you ARE a third party designee -- someone who has permission from the executor or trustee to go online and get the number. For example, an attorney who gets an EIN for a client is a third party designee. To apply as a third party designee, you need to get the trustee's or executor's signature at the bottom of the paper SS-4 that you filled out before you went online, as well as a separate letter authorizing you to do this. The Online Assistant asks you to state under penalty of perjury that you have this permission, so make sure that you have it before you click "yes."

8. Fiduciary Title? This comes up for estates, not trusts. There are three choices: Administrator - a person appointed by the court to serve as the person in charge of the estate, usually because there is no will or because the nominated executors were unable or unwilling to serve; Executor, the person nominated in the will and appointed to serve by the probate court; Personal Representative, the person nominated by the will, but not appointed by the court because there's no probate -- usually this would be in a small estate, where no court supervision is required.

9. Date Trust Funded and Closing Month of Accounting Year? These two questions come up in the same part of the form where you enter the legal name of the trust. The first date that the IRS wants here is the date of death. The closing month is either that same month, or December, depending on whether or not you made the 645 election earlier.

For example, if you are trustee for the trust of a person who died in July, you could choose to make July the ending month for that trust's accounting year OR stick with December. It's really a question of which is more convenient-- trying to wrap up the trust within one year or doing the trust's tax returns in April of the following year along with the deceaed person's individual returns that are due.

10. Dates Estate Created and Closing Month of Accounting Year? This question comes up if you are requesting an EIN for an estate. The date the estate was created is the date on which the person died. The closing month is the same month that the person died. For example, a person who died on July 12, 2014, would have an estate creation date of July 12, 2014 and a closing month of July.

11. Do you expect employees in the next 12 months? Usually, "no."

12. Review the info and submit. When you are finished, a summary appears with the information you entered, which you should double check. If it's all correct, click "Submit," and your new EIN number will appear. At least it almost always does. Sometimes the site crashes and you have to start over.


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