Tax Identification Number (TIN) for a Successor Trustee

A TIN (tax identification number) is required for a successor trustee depending on the circumstances of the trust. A successor trustee is a person who succeeds a trustee when the trustee dies, becomes incapacitated, ineligible, or disqualified from performing the duties of such office.

Should the successor trustee get a TIN for the trust?

Whether the successor trustee should get a TIN for the trust would require a two-step legal analysis:

• Is the trust a grantor or a non-grantor trust?
  1. If it is a grantor trust, has the grantor died? If yes, get a TIN. If no, there is no need to get a TIN.
• If the trust is a non-grantor trust, the trustee, whether the initial or a successor trustee, needs to get a TIN for the non-grantor trust.

TINs for grantor trusts

As a general rule, when a trust is a grantor trust, the income is reported using the grantor’s social security number (SSN). For tax purposes, the grantor trust is not considered a separate entity. Thus, a grantor trust does not require a separate TIN.

A grantor trust, under the Internal Revenue Code (26 USC § 676), is a trust where the grantor has retained the power to amend the terms or revoke the trust. Thus, in revocable living trusts, the trustee does not need to get a separate TIN. Any income produced in a revocable living trust is reported using the grantor’s SSN.

Usually, grantors designate themselves as the grantor, trustee, and beneficiary in revocable living trusts.

TINs for grantor trusts when the trustee becomes incapacitated, disqualified or ineligible

When a successor trustee succeeds a trustee in a grantor trust because the trustee became incapacitated, disqualified, or ineligible, does the successor trustee need to get a TIN?

Even if the trustee becomes incapacitated, disqualified or ineligible, if the grantor trust continues to be a grantor trust, the successor trustee does not need to get a TIN. Thus, even if the trustee becomes incapacitated, if the grantor still retains the power to amend the terms or revoke the trust, the trust continues to be a grantor trust and there is no need for the successor trustee to get a TIN for the trust.

TINs for grantor trusts when the grantor dies

When the grantor dies, the trust stops becoming a grantor trust because the grantor, due to death, has lost the capacity to revoke or amend the terms of the trust. The grantor trust then becomes a non-grantor trust. When the grantor in a grantor trust dies, the trustee must obtain a new taxpayer identification number. 26 CFR § 301.6109-1(a)(3)(i)(A).

TINs for non-grantor trusts

A non-grantor trust is any trust that is not a grantor trust. It is any trust where the grantor has given up the power to revoke or amend the terms of the trust. Thus, irrevocable trusts are considered non-grantor trusts. For example, Medicaid asset protection trusts, irrevocable life insurance trusts, charitable remainder trusts, and grantor-retained annuity trusts are considered irrevocable trusts where the grantor has given up the power, even in the grantor’s lifetime, to control the property transferred to the trust. Non-grantor trusts are considered separate entities for tax purposes. In these cases, the trustee, whether the initial or successor trustee, needs to get a TIN for the trust. Any income arising from non-grantor trust property will be reported under the trust’s TIN and not the grantor’s SSN, even if the grantor is still alive.

Reporting income in grantor trusts when the grantor dies

A trustee must exercise care when reporting income during the transition year in a grantor trust when the grantor dies. Income, losses, deductions, and credits must be properly allocated between pre- and post-death periods. Pre-death income, losses, deductions, and credits must be reported using the grantor’s SSN. Post-death income, etc. must be reported using the trust’s TIN. The trustee must provide the new TIN to third-party payers who were previously using the grantor’s SSN in their reporting.

How to get a TIN

To get a TIN/EIN for the trust, the trustee can apply online with or mail its application form to the IRS. Applying online is the easiest and fastest way to get a TIN, for as long as you have all information ready. Once you apply online and your application is validated, you will receive your nine-digit unique IRS tax identifier within minutes.

As trustee, knowing when to get a TIN for your trust is crucial because it can translate to tax savings. When trust property is earning a large amount of income, it is preferable to report it using the grantor’s SSN because the individual tax is lower than taxes on trust. However, there are instances when getting a TIN and ensuring that the trust is an independent entity is more important than the tax savings (such as in Medicaid asset protection trusts). In these cases, it is important to ask the help of a trusts attorney to ensure you are taking the right direction in getting a TIN for your trust. Should you need assistance, we at the Law Offices of Albert Goodwin are here for you. We have offices in New York City, Brooklyn, NY and Queens, NY. You can call us at 212-233-1233 or send us an email at [email protected].