What to believe…
As long as both people who set up a revocable living trust (RTL) are still alive you don’t need a separate tax ID number. Using a social security number from either party who owns the trust is perfectly fine. I get this question a lot because, for some reason, there are banks out there that will tell a customer with a revocable trust that they need a tax ID for it. Well, you don’t.
One of the things that we include with all trust documents given to our clients is a memorandum about why a tax payer ID is not needed for a revocable trust. It is easy to hand to the person at the bank who may think that it is required and proves difficult to convince otherwise. Again, using your social security number would be suitable for this purpose.
There is a situation when a tax ID number is needed for a RTL. Occasionally we have couples who have a joint trust when one of them passes on. For tax purposes we may section off part of the trust as the deceased spouse’s portion. That bucket will need a tax ID number at that point, but that’s something that our clients come to us about and we go over when needed. In general, though, most of my clients do not need a separate tax ID number.
Here’s what happened to one of my clients, who had to learn the hard way.
We told a client a number of times that she did not need a separate tax ID number. Nevertheless, she went down to the bank where the “nice man who worked there” said that she needed one. So the bank representative proceeded to go online and get a taxpayer ID number for her.
Well, over the next three years, she had to pay her accountant to write an official letter to the IRS after they sent her a nasty letter saying she didn’t file a required 1041 Trust tax return. However, a Trust tax return was not needed for a revocable trust; a 1040 form was all that was required. Nevertheless, she ended up having to pay an accountant three years in a row to send a letter to the IRS to saying that the 1041 form was not needed because “the nice man” at the bank insisted.
So before anyone tries to talk you into getting a tax ID number for a revocable trust, please contact me or our office. We have nice, friendly staff to help you.