Why Should a Trust Apply for a Federal Tax ID?

There are a wide spectrum of trust accounts, from living revocable trusts, to funeral trusts. But the basic rule of thumb is: If you are putting money into a trust, and you aren’t going to be responsible for the taxes, then that trust needs a federal tax ID. While this is a simplistic point of view (and a financial advisor can help further), trust accounts generally need their own tax ID/EIN when they have to file taxes.

When wouldn’t a trust need to file its own taxes? Living, revocable trusts still fall under your own personal control. You can be enriched by the assets within them. You can dissolve the trust at any time. And consequently, these trusts file under your own social security number, they file under your own tax forms, and they don’t need an EIN.

But if a trust is irrevocable (you have no control over it, you cannot dissolve it), then you are bound by the rules of the trust, and the trust is considered to be a separate financial entity from yourself. Then, the trust should apply for a federal tax ID, and it will file its taxes under that ID.


Written by Maurice Mallory