When the person who creates a revocable living trust dies (the person is known as the Grantor or the Settlor) dies and the trust is now irrevocable, the successor trustee/family will have some questions on next steps.
During your loved one's lifetime, their living trust was most likely a "grantor" trust, meaning the trust operated under his or her Social Security number. This made things simple and easy for your loved one and did not cause any income tax issues or reporting. But upon the grantor's death, his or her Social Security number cannot be used to manage the trust. The successor Trustee of the trust will need to get an EIN/TIN from the IRS in order to claim the trust's assets and generally manage the trust.
Once you receive an EIN from the IRS, the successor Trustee will be able to gather the trust's assets from the bank and other financial institutions. Without an EIN, the financial institutions will not allow any movement/management of the trust assets.
Example: Mom created a living trust to avoid probate upon her death. During her lifetime, the trust was income tax invisible and was not reported to the IRS. Upon her passing, the trust owned a bank account. The bank will not allow the successor trustee of the trust to take over the bank account without the successor Trustee getting a new EIN for the trust.
The IRS website is fairly easy to get an EIN, which can take about 5 minutes if you have the right information. You will generally need the following information to get an EIN for a now irrevocable trust:
- Grantor's Name (i.e., the trust creator's name)
- Grantor's Social Security Number
- Trustee's name and address (the trustee should create the EIN)
- The Trust's Name
In settling the trust, the trust may need to file a tax return upon/before final distribution on all assets. A trust needs to file a tax return if it has more than $600 in income during a taxable year. This means that simple trusts with outright distributions to beneficiaries will need an EIN, but may not need to file a tax return. Ultimately, we generally have our successor trustee clients work with a trusted CPA to confirm the tax issues.
If you are the successor trustee of a trust, you may need legal help to confirm your duties as trustee. If so, we have helped trustees settle many trusts, helping make sure our clients follow their legal duties and do not make mistakes in the process.
