Question of the Week
Friday, May 25, 2018 8:10 AM

Question:  Does a trust require an EIN?

Answer:  For a revocable trust, generally no.  For an irrevocable trust, yes. 

A revocable trust may use an EIN, but may also use the SSN of the creator of that trust, with that creator known as the grantor.  These kinds of trusts, when still revocable by the grantor, are still considered assets of that grantor, such that any income generated by that revocable trust is included in the income of the grantor.  This is because the trust is still considered “owned” by that grantor, who may revoke that trust at any time.  Since the grantor retains that ability to take the assets back at any time, from the IRS’s point of view, the trust is just a place where that grantor is storing assets.

Irrevocable trusts are their own separate entity, and must have their own EIN.  They may not use an SSN.  The grantor cannot take back those assets on demand and therefore such assets are not included in that grantor’s income.  This may be the case when the grantor dies, or if the grantor places assets into a trust but does not retain the ability to revoke that trust.

This distinction between whether or not a trust is revocable or not, is often an issue when a credit union has a trust as a member, and the grantor of that trust dies.  To be correctly reportable to the IRS, a trust using an SSN must be replaced with an EIN if that trust becomes irrevocable due to the death of grantor.

This explanation is intended to be simple and may not include every trust circumstance your credit union may encounter.  We do advise that you consult your counsel on any complex trust questions.